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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>As filed with the Securities and Exchange Commission on
    September&#160;3, 2009</B>
</DIV>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Registration
    No.&#160;333-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</B>
</DIV>

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<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

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    <B><FONT style="font-size: 14pt">SECURITIES AND EXCHANGE
    COMMISSION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">Washington,&#160;D.C.
    20549</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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    <B><FONT style="font-size: 18pt"><FONT style="white-space: nowrap">Form&#160;S-1</FONT></FONT></B>
</DIV>

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    <B><FONT style="font-size: 12pt">REGISTRATION STATEMENT UNDER
    THE SECURITIES ACT OF 1933</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">Archipelago Learning,
    Inc.</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Exact name of registrant as
    specified in its charter)</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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    <B>Delaware<BR>
    </B><I><FONT style="font-size: 8pt">(State or Other Jurisdiction
    of<BR>
    Incorporation or Organization)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>8200<BR>
    </B><I><FONT style="font-size: 8pt">(Primary Standard
    Industrial<BR>
    Classification Code Number)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>27-0767387<BR>
    </B><I><FONT style="font-size: 8pt">(I.R.S. Employer<BR>
    Identification No.) </FONT></I>
</TD>
</TR>
</TABLE>

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</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Archipelago Learning,
    Inc.</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">3400 Carlisle Street,
    Suite&#160;345</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Dallas, Texas
    75204-1257</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">(800)&#160;419-3191</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Address, Including Zip Code,
    and Telephone Number, Including Area Code, of Registrant&#146;s
    Principal Executive Offices)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Tim McEwen</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Chief Executive
    Officer</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Archipelago Learning,
    Inc.</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">3400 Carlisle Street,
    Suite&#160;345</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Dallas, Texas 75204</FONT></B>
</DIV>

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    <B><FONT style="font-size: 9pt">(800)&#160;419-3191</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Name, Address, Including Zip
    Code, and Telephone Number, Including Area Code, of Agent For
    Service)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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    <B><I><FONT style="font-size: 9pt">Copies to:</FONT></I></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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<TD align="center" valign="top">
    <B>Alexander D. Lynch,&#160;Esq.<BR>
    Weil, Gotshal &#038; Manges LLP<BR>
    767&#160;Fifth Avenue<BR>
    New York, New York 10153<BR>
    (212)&#160;310-8000 (Phone)<BR>
    (212)&#160;310-8007 (Fax)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>Valerie Ford Jacob,&#160;Esq.<BR>
    Steven G. Scheinfeld,&#160;Esq.<BR>
    Fried, Frank, Harris, Shriver &#038; Jacobson LLP<BR>
    One New York Plaza<BR>
    New York, New York 10004<BR>
    (212) 859-8000 (Phone)<BR>
    (212) 859-4000 (Fax) </B>
</TD>
</TR>
</TABLE>

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</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Approximate date of commencement of proposed sale to the
    public:</B>&#160;&#160;As soon as practicable after the
    effective date of this Registration Statement.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule&#160;415 under the Securities Act of 1933, as amended (the
    &#147;Securities Act&#148;), check the following
    box.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is filed to register additional securities for an
    offering pursuant to Rule&#160;462(b) under the Securities Act,
    please check the following box and list the Securities Act
    registration statement number of the earlier effective
    registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(c) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated filer
    or a smaller reporting company. See the definitions of
    &#147;accelerated filer,&#148; &#147;large accelerated
    filer&#148; and &#147;smaller reporting company&#148; in
    Rule&#160;12b-2 of the Exchange Act.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">Large
    accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
    <TD nowrap align="center">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    Accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
    <TD nowrap align="center">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    Non-accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#254;</FONT>
    </FONT></TD>
    <TD nowrap align="right">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    Smaller reporting company
    <FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CALCULATION
    OF REGISTRATION FEE</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterright -->
    <TD width="23%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterright -->
    <TD width="23%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Title of Each Class of<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Proposed Maximum<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Amount of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>Securities to be Registered</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Aggregate Offering Price(1)(2)</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Registration Fee</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Stock, $0.001&#160;par value
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $75,000,000
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $4,185
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT style="font-size: 9pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">Estimated solely for the purpose of
    calculating the registration fee in accordance with
    Rule&#160;457(o) promulgated under the Securities Act of 1933.
    Includes shares subject to the underwriters&#146; over-allotment
    option, if any.
    </FONT></TD>
</TR>

<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    <FONT style="font-size: 9pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">Includes shares of common stock
    that may be purchased by the underwriters to cover
    over-allotments, if any.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>The Registrant hereby amends this Registration Statement on
    such date or dates as may be necessary to delay its effective
    date until the Registrant shall file a further amendment which
    specifically states that this Registration Statement shall
    thereafter become effective in accordance with Section&#160;8(a)
    of the Securities Act of 1933 or until the Registration
    Statement shall become effective on such date as the Commission,
    acting pursuant to said Section&#160;8(a), may determine.</B>
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

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</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 94%; margin-left: 3%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPLANATORY
    NOTE</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, we conducted our business through
    Archipelago Learning Holdings, LLC, formerly known as Study
    Island Holdings, LLC, and its subsidiaries. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, Archipelago Learning, Inc.,
    a newly formed Delaware corporation, will consummate a corporate
    reorganization whereby Archipelago Learning Holdings, LLC will
    become a wholly owned subsidiary of Archipelago Learning, Inc.
    See &#147;Corporate Reorganization&#148; in the accompanying
    prospectus for a description of the corporate reorganization.
    This registration statement, including the prospectus contained
    herein, includes the audited consolidated financial statements,
    consolidated selected financial and other data and other
    financial information of Archipelago Learning Holdings, LLC,
    which holds all of our operating subsidiaries and after the
    corporate reorganization and this offering will be a direct
    subsidiary of Archipelago Learning, Inc., as well as the audited
    balance sheet of Archipelago Learning, Inc. Prior to the
    corporate reorganization and this offering, Archipelago
    Learning, Inc. held no material assets and did not engage in any
    operations.
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE style="color: #FF0000" width="100%" border="1" cellpadding="5"><TR><TD style=text-align:justify>
<FONT style="font-size: 10pt; font-family: Arial, Helvetica; color: #E8112D">The
information in this prospectus is not complete and may be
changed. Neither we nor the selling stockholders may sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.<BR>
</FONT>
</TD></TR></TABLE>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="color: #E8112D">Subject to Completion</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="color: #E8112D">Preliminary Prospectus dated
    September&#160;3, 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><U>PROSPECTUS</U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shares</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="d68999d6899903.gif" alt="ARCHIPELEGO LOGO"><B><FONT style="font-size: 18pt">
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">Archipelago Learning,
    Inc.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">Common Stock</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 19%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This is the initial public offering of our common stock. We are
    offering&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of the common stock offered by this prospectus, and the selling
    stockholders, which include entities affiliated with members of
    our board of directors, are
    offering&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock. We will not receive any proceeds from the sale
    of the shares to be offered by the selling stockholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect the public offering price to be between
    $&#160;&#160;&#160;&#160;&#160; and
    $&#160;&#160;&#160;&#160;&#160; per share. Currently, no public
    market exists for the shares. After pricing the offering, we
    expect that the shares will be listed on either the New York
    Stock Exchange or The NASDAQ Stock Market LLC under the symbol
    &#147;ARCL.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 12pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Investing in our common stock involves risks that are
    described in the &#147;Risk Factors&#148; section beginning on
    page&#160;13 of this prospectus.</B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 19%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="72%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Share</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to the selling stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters may also purchase up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    from us, and up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    from the selling stockholders, at the public offering price,
    less the underwriting discount, within 30&#160;days from the
    date of this prospectus to cover over-allotments, if any.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither the Securities and Exchange Commission nor any state
    securities commission has approved or disapproved of these
    securities or determined if this prospectus is truthful or
    complete. Any representation to the contrary is a criminal
    offense.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The shares will be ready for delivery on or
    about&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 19%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">BofA Merrill Lynch</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 19%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The date of this prospectus
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="95%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#101'>Prospectus Summary</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#102'>Risk Factors</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#103'>Forward-Looking Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#104'>Providence Equity Transactions</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#105'>Corporate Reorganization</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#106'>Use of Proceeds</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#107'>Dividend Policy</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#108'>Capitalization</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    37
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#109'>Dilution</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#110'>Selected Historical Consolidated Financial
    Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#111'>Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#112'>Industry and Market Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    64
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#113'>Business</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#114'>Management</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#115'>Compensation Discussion and Analysis</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    84
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#116'>Certain Relationships and Related Person
    Transactions</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#117'>Principal and Selling Stockholders</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    104
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#118'>Description of Capital Stock</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    106
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#119'>Description of Material Indebtedness</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#120'>Shares Eligible for Future Sale</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    112
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#121'>Certain Material U.S. Federal Income Tax
    Considerations</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    114
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#122'>Underwriting</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    117
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#123'>Legal Matters</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    124
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#124'>Experts</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    124
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#125'>Where You Can Find Additional Information</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    124
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#126'>Index to Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv3w3.htm">EX-3.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w1.htm">EX-10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w2.htm">EX-10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w5.htm">EX-10.5</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w6.htm">EX-10.6</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w7.htm">EX-10.7</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w8.htm">EX-10.8</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w9.htm">EX-10.9</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w10.htm">EX-10.10</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w11.htm">EX-10.11</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w12.htm">EX-10.12</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w13.htm">EX-10.13</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w14.htm">EX-10.14</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w15.htm">EX-10.15</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w16.htm">EX-10.16</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w17.htm">EX-10.17</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w18.htm">EX-10.18</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w19.htm">EX-10.19</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w20.htm">EX-10.20</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w21.htm">EX-10.21</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w22.htm">EX-10.22</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w23.htm">EX-10.23</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w24.htm">EX-10.24</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w25.htm">EX-10.25</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w26.htm">EX-10.26</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv10w27.htm">EX-10.27</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv21w1.htm">EX-21.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv23w1.htm">EX-23.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d68999exv23w2.htm">EX-23.2</A></FONT></TD></TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 19%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>You should rely only on the information contained in this
    prospectus. We have not, the selling stockholders have not and
    the underwriters have not authorized any other person to provide
    you with different information. If anyone provides you with
    different or inconsistent information, you should not rely on
    it. We are not, the selling stockholders are not and the
    underwriters are not making an offer to sell these securities in
    any jurisdiction where the offer or sale is not permitted. You
    should assume that the information appearing in this prospectus
    is only accurate as of the date on the front cover of this
    prospectus. Our business, financial condition, results of
    operations and prospects may have changed since that date.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#147;Archipelago Learning,&#148; &#147;Study Island,&#148;
    &#147;TeacherWeb,&#148; &#147;Northstar Learning&#148; and their
    respective logos are our trademarks. Solely for convenience, we
    refer to our trademarks in this prospectus without the
    <SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>&#160;and&#160;<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>&#160;symbols,

    but such references are not intended to indicate, in any way,
    that we will not assert, to the fullest extent under applicable
    law, our rights to our trademarks. Other service marks,
    trademarks and trade names referred to in this prospectus are
    the property of their respective owners. As indicated in this
    prospectus, we have included market and industry data obtained
    from industry publications and other sources. See &#147;Industry
    and Market Data.&#148;
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<A name='101'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUMMARY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>This section summarizes key information contained elsewhere
    in this prospectus and is qualified in its entirety by the more
    detailed information and consolidated financial statements
    included elsewhere in this prospectus. You should carefully
    review the entire prospectus, including the risk factors, the
    consolidated financial statements and the notes thereto, and the
    other documents to which this prospectus refers before making an
    investment decision. Prior to this offering, we conducted our
    business through Archipelago Learning Holdings, LLC, formerly
    known as Study Island Holdings, LLC, and its subsidiaries.
    Immediately prior to the consummation of this offering, and in
    accordance with and as contemplated by the limited liability
    company agreement of Archipelago Learning Holdings, LLC,
    Archipelago Learning, Inc., a newly formed Delaware corporation,
    will consummate a corporate reorganization whereby Archipelago
    Learning Holdings, LLC will become a wholly owned subsidiary of
    Archipelago Learning, Inc. Archipelago Learning, Inc. will act
    as a holding company for our business after the corporate
    reorganization, and its shares of common stock are offered
    hereby. Unless the context requires otherwise, references in
    this prospectus to &#147;Archipelago Learning,&#148;
    &#147;we,&#148; &#147;us,&#148; &#147;our company&#148; or
    similar terms refer to Archipelago Learning, Inc. and its
    subsidiaries, after giving effect to our corporate
    reorganization. Prior to the corporate reorganization and this
    offering, Archipelago Learning, Inc., held no material assets
    and did not engage in any operations.</I>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Company</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning is a leading subscription-based online
    education company. We provide standards-based instruction,
    practice, assessments and productivity tools that improve the
    performance of educators and students via proprietary web-based
    platforms. Study Island, our core product line, helps students
    in Kindergarten through 12th&#160;grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year, Study Island products were utilized by
    approximately 8.3&#160;million students in over 19,200 schools
    in 50&#160;states who answered over 2.8&#160;billion of our
    practice questions. We recently began offering classroom and
    school website portals, digital lockers and teacher productivity
    tools through our TeacherWeb services and online postsecondary
    programs through our Northstar Learning product line.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island combines rigorous content that is highly customized
    to specific standards in reading, math, science and social
    studies with interactive features and games that engage students
    and reinforce and reward learning achievement. Our programs also
    enable educators to track student performance in real-time to
    address individual student learning gaps, while allowing
    administrators to monitor student progress and measure teacher
    effectiveness. Through continued product expansion, viral
    word-of-mouth marketing and a proven sales organization, Study
    Island has the opportunity to grow by increasing sales to
    existing school customers as well as adding new school customers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We capitalize on two significant trends in the education market:
    (1)&#160;an increased focus on higher academic standards and
    educator accountability for student achievement, which has led
    to periodic assessment in the classroom to gauge student
    learning and inform instruction, and (2)&#160;the increased
    availability and utilization of web-based technologies to
    enhance and supplement teacher instruction, engage today&#146;s
    technology-savvy learners and improve student outcomes.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Market Opportunity</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U.S.&#160;educational system, consisting of K-12 and
    postsecondary education, collectively includes approximately
    74&#160;million students and approximately $1 trillion in
    educational expenditures according to the National Center for
    Education Statistics, or NCES. We operate primarily in the
    U.S.&#160;K-12 education market, which consists of approximately
    54&#160;million students in more than 112,600 schools according
    to Market Data Retrieval, or MDR. The U.S.&#160;K-12 school
    system has over 90,600 public schools in over 15,200 school
    districts and county and regional centers and more than 22,000
    private and Catholic schools, according to MDR.
</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that we have a growing market opportunity as a result
    of an increased emphasis on school and teacher accountability,
    legislative developments, including the reauthorization of the
    Elementary and Secondary Education Act, commonly referred to as
    No Child Left Behind, or NCLB, which emphasizes annual student
    assessment, as well as increased access to computers and the
    internet in and out of the classroom. In addition, schools use a
    variety of supplemental materials to augment the core
    curriculum, provide remediation and enrichment, and offer
    additional learning opportunities in the classroom and at home.
    An estimated $11.5&#160;billion was spent on the K-12
    instructional materials market in 2008, according to Outsell,
    Inc., a research and advisory firm focused on the publishing,
    information, and education industries, or Outsell. In 2009,
    Outsell projects that spending on instructional content will
    grow by about 2-4%, and spending on assessment, tutoring and
    test preparation services will grow by about 4.8-5.2%. Between
    2010 and 2012 the overall market is expected to grow at an
    annual compounded growth rate of 5.5% according to Outsell.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe increased accountability, including the need for
    school districts and states to meet the requirements of NCLB and
    other legislative developments, combined with the increased
    availability and utilization of web-based technologies by
    teachers, students and administrators has resulted in decreased
    spending on traditional print-based and software-based
    supplemental materials and increased spending on innovative
    online programs that offer functionality and real-time
    assessment and reporting not provided by traditional solutions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competitive Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the following are our key competitive strengths:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Customized, Standards-Based Content.</I>&#160;&#160;Study
    Island offers online, standards-based instruction, practice and
    assessments for K-12 built from applicable standards in each of
    the 50&#160;states, as well as Washington, DC. In addition,
    Northstar Learning offers instruction, practice, assessments and
    test preparation for the GED and allied health licensure exams,
    as well as developmental studies in college readiness
    English/language arts and mathematics.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Real-time Student Tracking, Built-in Remediation and
    Enrichment.&#160;&#160;</I>We provide real-time reporting on
    student achievement, allowing educators to quickly identify
    learning gaps and provide targeted instruction and practice.
    Study Island also provides students with immediate feedback and
    explanations and, when required, remediation content designed to
    build foundational skills in order to accelerate students to
    grade-level proficiency.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Engaging, Fun and Easy to Use for
    Students.</I>&#160;&#160;Our products utilize a simple,
    graphical user interface that is intuitive and easy to use. In
    addition, our Study Island products incorporate games and
    rewards in order to make learning fun and engaging for students.
    By engaging students and providing them with the tools they need
    to succeed, we enable them to take control of their own
    learning, boost their confidence and keep them interested in
    using our products, while creating a culture of academic success.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Accessible, Dynamic Web-based Platform.</I>&#160;&#160;Our
    products are delivered entirely online so they can be used by
    teachers and students on computers wherever internet access is
    available. Our programs are compatible with existing school and
    school district enterprise systems and require no additional
    software, no installation or maintenance and no extensive
    implementation or training.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>High Impact, Low Cost Solution.</I>&#160;&#160;By providing a
    single, comprehensive solution for core subjects across a wide
    range of grade levels, Study Island eliminates the need for
    schools to have multiple vendors or systems, saving them both
    time and money. In addition, at an average annual price per
    student per subject of $3.00, or $10.00 per student for all
    subjects, our products offer customers a compelling value
    proposition compared to traditional print, software and online
    alternatives provided by large education publishers.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Management Team with Strong Education Industry
    Expertise.</I>&#160;&#160;Members of our senior management team
    have extensive experience in the education industry and in
    serving the
</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    2
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    academic community. Our Chief Executive Officer Tim McEwen, who
    has approximately 34&#160;years of experience in the industry,
    and our Chief Financial Officer James Walburg, who has
    27&#160;years of public company accounting and finance
    experience, both joined us in 2007. Our Chief Technology Officer
    Ray Lowrey, who has approximately 14&#160;years of experience in
    the education industry, joined us in 2008. Under their
    leadership, the number of school customers and registered
    student users of our Study Island products have increased from
    approximately 7,800 and 3.0&#160;million, respectively, in 2006,
    to over 19,200 and 8.3&#160;million, respectively, in
    June&#160;2009.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Key
    Attributes of Our Business Model</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the following are the key attributes of our business
    model:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>High Revenue Visibility and Strong Cash Flow
    Generation.&#160;&#160;</I>We believe we have an attractive
    business model characterized by a visible recurring revenue
    stream and high profit margins. In addition, we believe our low
    capital expenditure requirements and up-front subscription
    payments by customers result in strong cash flow generation and
    high returns on invested capital.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Scalability and Flexibility.</I>&#160;&#160;We continue to
    scale our business by increasing our product offerings, our
    sales and the number of students, teachers and schools using our
    products without incurring significant incremental expense. Our
    content development process, our flexible sales model and our
    cost-effective centralized, hosted online delivery platform
    allow us to minimize our costs as we expand our product
    offerings and our business.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Powerful, Demand-Driven Sales&#160;&#038;
    Marketing.</I>&#160;&#160;Our Study Island products are often
    introduced into the classroom by principals or teachers, rather
    than mandated by district-level administrators. In addition to
    this viral demand for our products and services, we have a 113
    member team of specialized sales and marketing professionals. As
    a result of this strategy, we set the price points for our K-8
    products at levels that fall within a school principal&#146;s
    discretionary budget or that can be funded by individual
    teachers or through parent fundraising efforts.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Growth Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Expand the Number of Schools Using Our Study Island
    Products.</I>&#160;&#160;In the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year, our Study Island products were used by over 19,200
    schools throughout all 50&#160;states and Washington, DC,
    representing approximately 17.1% of the over 90,600 public and
    22,000 private and Catholic K-12 schools in the United States.
    We believe that there is a significant opportunity to expand the
    number of schools that use Study Island, particularly the number
    of high schools. Our high school products generally have higher
    price points than our K-8 products and accounted for
    approximately 10% of our service revenue in 2008.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Increase Revenue per School.</I>&#160;&#160;In many schools
    that we serve, we have the opportunity to sell additional core
    grade level and subject area products, as well as new products,
    such as our benchmark assessments and graphic novel reading
    intervention, to teachers who already subscribe to one or more
    of our products. We also market TeacherWeb to our Study Island
    customer base.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Develop New Products and Enhance our Online
    Platform.</I>&#160;&#160;We continually develop new Study Island
    products, as well as new features and functionality for our
    online platform, to address student needs and teacher requests.
    These new products also provide additional revenue
    opportunities. For instance, we intend to introduce new high
    school oriented products, including reading and math remediation
    products, core subject end of course and exit exam preparation,
</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    advanced placement exam preparation, PSAT, SAT, ACT and other
    test preparation, and high school courses for credit and credit
    recovery.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Expand Into New Related Markets.</I>&#160;&#160;We believe
    there is a significant opportunity to grow sales of our products
    and services through the introduction of new products for the
    postsecondary market. We launched our Northstar Learning product
    line in April 2009 to enter this market, utilizing our content
    development, instruction, exam preparation and assessment
    expertise. In addition, we believe there are additional market
    opportunities outside of the United States and outside of the
    traditional school setting. We are planning to introduce our
    Study Island products in Canada in the fourth quarter of 2009.
    We are exploring the opportunities to introduce our Study Island
    products in other international markets and to sell our products
    directly to parents as well as expanding our sales efforts to
    public libraries, school libraries and homeschool settings.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Pursue Acquisitions and Strategic
    Relationships.</I>&#160;&#160;Since 2007, we have sought
    acquisitions and strategic relationships that expand our product
    and service offerings and provide additional revenue
    opportunities. We intend to continue to pursue acquisitions that
    have products, services and businesses that are compatible with
    our Archipelago Learning brand identity, culture and corporate
    mission. In addition, we believe our large student audience of
    over 8&#160;million K-12 students provides a significant
    opportunity to generate cross-sales of other appropriate,
    teacher- and parent-approved products to this valuable
    demographic.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Associated with Our Business</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business is subject to numerous risks, as discussed more
    fully in the section entitled &#147;Risk Factors&#148; beginning
    on page 13 of this prospectus, which you should read in its
    entirety. In particular:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Most of our customers are public schools, which rely on state,
    local and federal funding. If any state, local or federal
    funding is materially reduced, our public school customers may
    no longer be able to afford to purchase our products and
    services;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    If national educational standards and assessments are adopted,
    or if existing metrics for applying state standards are revised,
    new competitors could more easily enter our markets or the
    demands in the markets we currently serve may change;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    If Congress does not reauthorize the Elementary and Secondary
    Education Act, commonly referred to as NCLB since the 2001
    reauthorization, or other legislation does not continue to
    mandate state educational standards and annual assessments,
    demand for our products and services could be materially
    adversely affected;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our recent rapid growth, the recent introduction of a number of
    our products and services and our entry into new markets make it
    difficult for us to evaluate our current and future business
    prospects, and we may be unable to effectively manage our growth
    and new initiatives;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    The recent ongoing adoption of online learning in established
    education markets makes it difficult for us to evaluate our
    current and future business prospects. If web-based education
    fails to achieve widespread acceptance by students, parents,
    teachers, schools and other institutions, our growth and
    profitability may materially suffer;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our service revenue is primarily generated by sales of
    subscriptions to our Study Island products over the term of the
    subscription. Our customer renewal rates for Study Island,
    Teacher Web and Northstar Learning are difficult to predict and
    declines in our sales of Study Island products or in renewal
    rate may materially adversely affect our business and results of
    operations; and
</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our Study Island products are predominantly purchased by
    individual schools, and any decisions at the district or state
    level to use the products and services of one of our
    competitors, or to limit or reduce the use of web-based
    educational products, could materially adversely affect our
    ability to attract and retain customers.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Principal
    Stockholders</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2007, investment funds affiliated with Providence
    Equity Partners, together with Cameron Chalmers and David Muzzo
    (our founders and vice presidents) and MHT-SI, LP, acquired 100%
    of the voting equity interests in Archipelago Learning Holdings,
    LLC (formerly known as Study Island Holdings, LLC), the parent
    of Archipelago Learning, LLC (formerly known as Study Island,
    LLC), which subsequently acquired substantially all of the
    assets of Study Island, LP, our predecessor. As a result of
    these transactions, affiliates of Providence Equity Partners own
    approximately 77.2% of our voting equity interests, Cameron
    Chalmers and David Muzzo together own approximately 18.2% of our
    voting equity interests divided equally between them, and
    MHT-SI, LP owns approximately 4.6% of our voting equity
    interests. For a more detailed description of the acquisition,
    see &#147;Providence Equity Transactions.&#148;
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Corporate
    Reorganization</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, Archipelago Learning Holdings, LLC and
    its subsidiaries conducted our business. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, the holders of shares of
    Archipelago Learning Holdings, LLC, and certain of their
    affiliates will enter into transactions with Archipelago
    Learning, Inc. pursuant to which direct or indirect holders of
    Class&#160;A,
    <FONT style="white-space: nowrap">Class&#160;A-2,</FONT>
    Class&#160;B and Class&#160;C shares will exchange their shares
    for common stock, restricted stock and restricted stock unit
    awards. The purpose of this corporate reorganization is to
    reorganize our corporate structure so that the top tier entity
    in our corporate structure&#160;- the entity whose common stock
    is being offered to the public in this offering&#160;- is a
    corporation rather than a limited liability company and so that
    our existing investors will directly own our common stock.
</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    5
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our ownership and corporate structure immediately following the
    Corporate Reorganization are set forth in the following chart:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <IMG src="d68999d6899902.gif" alt="OWNERSHIP CHART"><B><FONT style="font-family: 'Times New Roman', Times">
    </FONT></B>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Executive Offices</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the Corporate Reorganization, we operated our business
    through Archipelago Learning Holdings, LLC, a Delaware limited
    liability company, and its subsidiaries. Immediately prior to
    the consummation of this offering, we will consummate the
    Corporate Reorganization and operate our business through a
    newly formed Delaware corporation, Archipelago Learning, Inc.
    Our principal executive offices are located at 3400 Carlisle
    Street, Suite&#160;345, Dallas, TX 75204, and our telephone
    number is
    <FONT style="white-space: nowrap">(800)&#160;419-3191.</FONT>
    We have a website at www.archipelagolearning.com. The
    information that appears on our website is not part of, and is
    not incorporated into, this prospectus.
</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    6
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Offering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered by us</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common stock offered by the selling stockholders</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Total offering</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding after this offering</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Over-allotment option</TD>
    <TD></TD>
    <TD valign="bottom">
    The underwriters have an option to purchase a maximum
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;additional
    shares of common stock to cover over-allotments. Of
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    subject to the
    option,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    would be sold by the selling stockholders
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    would be sold by us. The underwriters can exercise this option
    at any time within 30&#160;days from the date of this prospectus.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="bottom">
    We estimate that the net proceeds to us from this offering,
    after deducting underwriting discounts and estimated offering
    expenses, will be approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, assuming the
    shares are offered at $&#160;&#160;&#160;&#160;&#160; (the
    midpoint of the price range set forth on the cover of this
    prospectus). We intend to use the net proceeds of this offering
    for general corporate purposes. We will not receive any proceeds
    from the sale of shares by the selling stockholders. See
    &#147;Use of Proceeds.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Dividend policy</TD>
    <TD></TD>
    <TD valign="bottom">
    We do not anticipate paying any dividends on our common stock in
    the foreseeable future. See &#147;Dividend Policy.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="bottom">
    Investing in our common stock involves a high degree of risk.
    See &#147;Risk Factors&#148; beginning on page&#160;13 of this
    prospectus for a discussion of factors you should carefully
    consider before investing in our common stock.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Proposed NYSE or Nasdaq symbol</TD>
    <TD></TD>
    <TD valign="bottom">
    &#147;ARCL&#148;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated, the number of shares of common stock
    to be outstanding after this offering:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    excludes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock issuable upon exercise of stock options that
    we intend to grant at the time of this offering, at an exercise
    price equal to the initial public offering price;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock, restricted stock and restricted stock unit
    awards reserved for future grants under our 2009 Omnibus
    Incentive Plan.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated, the information in this prospectus:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    gives effect to the Corporate Reorganization;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    gives effect to our amended and restated certificate of
    incorporation and our amended and restated bylaws, which will be
    in effect immediately prior to the consummation of this offering;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    assumes no exercise of the underwriters&#146; option to purchase
    up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares from us and up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;additional
    shares from the selling shareholders; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    assumes an initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share, the midpoint of the
    price range set forth on the cover of this prospectus.
</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Historical Consolidated Financial and Other Data</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the summary historical and
    adjusted consolidated financial data for Archipelago Learning
    Holdings, LLC for the periods and at the dates indicated. We
    derived the summary consolidated financial data presented below
    for the years ended December&#160;31, 2008, December&#160;31,
    2007 and December&#160;31, 2006 from the audited consolidated
    financial statements of Archipelago Learning Holdings, LLC
    included elsewhere in this prospectus. We derived the summary
    consolidated financial data for the six months ended
    June&#160;30, 2009 and June&#160;30, 2008 and as of
    June&#160;30, 2009 from the unaudited consolidated financial
    statements of Archipelago Learning Holdings, LLC included
    elsewhere in this prospectus. We have prepared the unaudited
    consolidated financial information set forth below on the same
    basis as the audited consolidated financial statements and have
    included all adjustments, consisting of only normal recurring
    adjustments, that we consider necessary for a fair presentation
    of our financial position and operating results for such
    periods. The interim results set forth below are not necessarily
    indicative of results for the year ending December&#160;31, 2009
    or for any other period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2007, Providence Equity Partners, together with
    Cameron Chalmers and David Muzzo (our founders and vice
    presidents) and MHT-SI, LP, acquired 100% of the voting equity
    interests in Archipelago Learning Holdings, LLC, the parent of
    Archipelago Learning, LLC, which acquired substantially all of
    the assets of Study Island, LP. See &#147;Providence Equity
    Transactions.&#148; All periods ending prior to January&#160;1,
    2007 are referred to as &#147;Predecessor,&#148; and all periods
    including and after such date are referred to as
    &#147;Successor.&#148; The consolidated financial statements for
    all Successor periods may not be comparable to those of the
    Predecessor period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Contained within the 2007 consolidated financial statements are
    nine calendar days of operations and cash flows of the
    Predecessor. Such amounts are not material to the overall 2007
    consolidated financial statements taken as a whole. Further, the
    consolidated financial position of the Predecessor immediately
    prior to the January&#160;10, 2007, transaction was not
    materially different from that of December&#160;31, 2006.
    Accordingly, we have chosen January&#160;1, 2007, as a date of
    convenience in presenting successor operating results and the
    financial statement information for the period from
    January&#160;1, 2007 through January&#160;9, 2007 has not been
    presented separately.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the summary historical consolidated financial and
    other data does not include financial statements of Archipelago
    Learning, Inc. because it has been formed recently for the
    purpose of effecting the offering and until the consummation of
    the Corporate Reorganization described more fully in
    &#147;Corporate Reorganization,&#148; it will hold no material
    assets and will not engage in any operations. Upon completion of
    the Corporate Reorganization, Archipelago Learning, Inc. will
    become the parent of Archipelago Learning Holdings, LLC and its
    subsidiaries and will have no other assets or operations. See
    &#147;Corporate Reorganization.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our historical results are not necessarily indicative of future
    operating results. You should read the information set forth
    below in conjunction with &#147;Selected Historical Consolidated
    Financial Data,&#148; &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of Operations,&#148;
    and the consolidated financial statements and the related notes
    included elsewhere in this prospectus.
</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="43%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Six Months Ended June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" nowrap align="center" valign="bottom">
    <B>(Dollars in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated Statements of Income:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Service revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,065
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    32,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    21,427
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cost of revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,178
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,782
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,722
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29,890
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,297
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,645
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,793
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,669
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,193
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,195
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Content development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    712
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,162
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    926
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,588
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,644
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,310
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,417
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,885
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,999
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,431
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,977
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Income from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,615
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,891
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,866
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,668
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (838
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,161
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,745
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,377
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Interest income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    247
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    160
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Derivative loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (173
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (309
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (141
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (668
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,033
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,894
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,504
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Income before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,947
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    (Provision) benefit for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (23
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (42
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (133
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    <B>Other Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    EBITDA(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,707
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,112
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,955
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,499
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,047
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Adjusted EBITDA(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,146
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,119
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    21,851
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,397
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Number of schools using Study Island products(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,441
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,214
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pro Forma<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As Adjusted(3)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Balance Sheet Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    26,468
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    144,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    67,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    99,463
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total members&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    44,949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    We present EBITDA and Adjusted EBITDA in this prospectus to
    provide investors with supplemental measures of our operating
    performance and, in the case of Adjusted EBITDA, information
    utilized in the calculation of the financial covenants under our
    credit facility and in the determination of compensation.
    EBITDA, as used in this prospectus, is defined as consolidated
    net income before net interest expense, consolidated income
    taxes and consolidated depreciation and amortization. Adjusted
    EBITDA differs from </TD>
</TR>

</TABLE>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    the term &#147;EBITDA&#148; as it is commonly used. Adjusted
    EBITDA, as used in this prospectus, means &#147;Consolidated
    EBITDA&#148; as that term is defined under our credit facility,
    which is generally consolidated net income before consolidated
    interest expense, consolidated amortization expense,
    consolidated depreciation expense, consolidated tax expense, in
    each case as defined more fully in the agreement governing our
    credit facility. The other items excluded in this calculation
    include, but are not limited to, derivative losses, changes in
    deferred revenue, non-cash compensation expense, certain
    investment and permitted acquisition expenses, certain permitted
    payments to Providence Equity Partners, unusual non-recurring
    charges, agency fees paid to the administrative agent and
    adjustments related to the acquisition of TeacherWeb.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    In addition to the financial covenant requirements under our
    credit facility, management uses EBITDA and Adjusted EBITDA as a
    measure of operating performance for planning purposes,
    including the preparation of budgets and projections, as well as
    to facilitate analysis of the allocation of resources and to
    evaluate the effectiveness of business strategies. Further, we
    believe EBITDA and Adjusted EBITDA are frequently used by
    securities analysts, investors and other interested parties in
    the evaluation of companies in industries similar to ours.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    EBITDA enables investors to isolate the effects on profitability
    and operating metrics, such as service revenue, operating
    expense and selling, general and administrative expense. In
    addition to its use to monitor performance trends, EBITDA
    provides a comparative metric to management and investors that
    is consistent across companies that have different capital
    structures, operate in different tax jurisdictions and capital
    investments. This enables management and investors to compare
    our performance on a consolidated basis and on a segment basis
    to that of our peers. Adjusted EBITDA is also used by management
    to measure operating performance and by investors to measures a
    company&#146;s ability to service its debt and other cash needs.
    Management believes the inclusion of the adjustments to EBITDA
    and Adjusted EBITDA are appropriate to provide additional
    information to investors about certain material non-cash items
    and about unusual items that we do not expect to continue at the
    same level in the future.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    EBITDA and Adjusted EBITDA are not recognized terms under GAAP.
    Accordingly, they should not be used as indicators of, or
    alternatives to, net income as measures of operating
    performance. Although we use EBITDA as a measure to assess the
    operating performance of our business, EBITDA has significant
    limitations as an analytical tool because it excludes certain
    material costs. For example, it does not include interest
    expense, which has been a necessary element of our costs.
    Because we use capital assets, depreciation expense is a
    necessary element of our costs and ability to generate service
    revenue. In addition, the omission of the substantial
    amortization expense associated with our intangible assets
    further limits the usefulness of this measure. EBITDA also does
    not include the payment of taxes, which is also a necessary
    element of our operations. Because EBITDA does not account for
    these expenses, its utility as a measure of our operating
    performance has material limitations. Because of these
    limitations management does not view EBITDA in isolation or as a
    primary performance measure and also uses other measures, such
    as net income, invoiced sales, average purchase and renewal rate
    to measure operating performance. Because the definitions of
    EBITDA and Adjusted EBITDA (or similar measures) may vary among
    companies and industries, they may not be comparable to other
    similarly titled measures used by other companies.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
     </TD>
    <TD></TD>
    <TD valign="bottom">
</TD>
</TR>

</TABLE>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    10
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    The following table presents a reconciliation of EBITDA and
    Adjusted EBITDA to net income for each of the periods presented:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-left: 3%; margin-right: 0%">
<TABLE border="0" width="97%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="48%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Six Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>(unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Net Income</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    838
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,161
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,745
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,377
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (343
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (247
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (160
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tax provision (benefit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (164
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    42
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Depreciation/amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    71
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,670
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,183
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,520
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>EBITDA</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,707
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,112
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,955
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,499
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,047
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Derivative loss(A)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,119
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    309
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    141
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Change in deferred revenue(B)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,439
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,613
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,791
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,727
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (454
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stock based compensation(C)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    355
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Investments and permitted acquisition expense(D)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    37
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    57
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Sponsor payments(E)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Unusual, non-recurring charges(F)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    564
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    955
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    306
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Agency fees(G)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    113
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    TeacherWeb pro forma adjustments(H)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    235
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    235
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Adjusted EBITDA</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,146
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,119
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    21,851
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,397
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>



<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    11
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV style="font-size: 12pt; margin-left: 4%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD width="92%"></TD>
</TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(A) </TD>
    <TD></TD>
    <TD valign="bottom">
    Derivative loss includes our interest rate swap that we entered
    into as required by our credit facility.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(B) </TD>
    <TD></TD>
    <TD valign="bottom">
    Change in deferred revenue is the net change in deferred revenue
    at the end of such period from the deferred revenue at the end
    of the previous period. For a description of how we calculate
    deferred revenue, see &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of
    Operations&#160;&#151; Components of Service Revenue and
    Expense&#160;&#151; Service Revenue.&#148;</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(C) </TD>
    <TD></TD>
    <TD valign="bottom">
    Stock-based compensation includes non-cash compensation expense
    recorded in respect of shares of Archipelago Learning Holdings,
    LLC issued to our employees. See Note&#160;12 to our financial
    statements contained elsewhere in this prospectus.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(D) </TD>
    <TD></TD>
    <TD valign="bottom">
    Investments and permitted acquisition expense includes cash fees
    and expenses in connection with investments or acquisitions
    permitted by our credit facility.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(E) </TD>
    <TD></TD>
    <TD valign="bottom">
    Sponsor payments are payments to Providence Equity Partners that
    are permitted under our credit facility, and include the
    reimbursement of customary fees and reasonable out-of-pocket
    expenses to our directors or the managers of Archipelago
    Learning Holdings, LLC, such as travel and other expenses.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(F) </TD>
    <TD></TD>
    <TD valign="bottom">
    Unusual, non-recurring charges include severance costs,
    relocation costs, retention bonuses, and one-time contract
    labor, accounting, legal and bank fees. In 2009, we also
    incurred one-time expenses in connection with our initial public
    offering.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(G) </TD>
    <TD></TD>
    <TD valign="bottom">
    Agency fees are fees paid to the agents under our credit
    facility.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(H) </TD>
    <TD></TD>
    <TD valign="bottom">
    TeacherWeb pro forma includes adjustments to reflect
    TeacherWeb&#146;s EBITDA from January 2008 until our acquisition
    of TeacherWeb in June 2008.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    A school is considered to be using our products if it has an
    active subscription for any or all of the Study Island products
    available to it.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Gives effect to (i)&#160;our Corporate Reorganization as more
    fully described in &#147;Corporate Reorganization&#148; and
    (ii)&#160;the sale
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock in this offering by us at an assumed initial
    public offering price of $&#160;&#160;&#160;&#160;&#160; per
    share (the midpoint of the price range set forth on the cover of
    this prospectus) after deducting underwriting discounts and
    commissions and estimated offering expenses payable by us, and
    the application of the net proceeds from this offering as
    described under &#147;Use of Proceeds.&#148;</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    12
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='102'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>An investment in our common stock involves a high degree of
    risk. You should carefully consider the following risks, as well
    as the other information contained in this prospectus, before
    making an investment in our company. If any of the following
    risks actually occur, our business, results of operations or
    financial condition may be materially adversely affected. In
    such an event, the trading price of our common stock could
    decline and you could lose part or all of your investment.
    Additional risks that we currently do not know about or that we
    currently believe to be immaterial may also impair our business
    operations.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to Our Business and Industry</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Most of
    our customers are public schools, which rely on state, local and
    federal funding. If any state, local or federal funding is
    materially reduced, our public school customers may no longer be
    able to afford to purchase our products and services, and our
    business, financial condition, results of operations and cash
    flow could be materially adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2008 and the first six months of 2009, approximately 96.8%
    and 93.1%, respectively, of our service revenue was generated by
    sales of our Study Island products. Approximately 99.0% of our
    Study Island customers in 2008 and the first six months of 2009,
    respectively, were public schools and school districts. Although
    public funding varies by state and municipality, public schools
    and districts typically receive most of their funding from state
    and local governments, and a smaller portion from the federal
    government. Budget appropriations for education at all levels of
    government are determined through the political process and, as
    a result, the funding schools receive may fluctuate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    State and federal educational funding is primarily funded
    through income taxes, and local educational funding is primarily
    funded through property taxes. As a result of the ongoing
    recession, income tax revenue for the 2008 tax year has
    decreased, which has put pressure on state and federal budgets.
    In addition, with the recent decline in real estate values in
    almost every state and the resulting reassessments, property tax
    revenue is expected to decline over the next few years. For
    example, in the fourth quarter of 2008, North Carolina,
    Pennsylvania and Ohio, three of the four states accounting for
    our highest per-state service revenue, have had decreases in
    their tax revenue of 3.9%, 3.6% and 5.4%, respectively,
    resulting in mid-year 2009 budget gaps of $2.0&#160;billion,
    $2.3&#160;billion and $1.2&#160;billion, respectively.
    Continuing unfavorable economic conditions may result in
    education budget cuts and lead to lower overall spending,
    including lower technology spending, by our current and
    potential clients, which may materially adversely affect our
    service revenue. According to the Center on Budget and Policy
    Priorities, at least 25&#160;states made cuts or have proposed
    cuts to K-12 and early education funding in their 2010 budgets.
    Declines in tax receipts and gaps in states&#146; budgets could
    result in decreased education spending as well as cuts in
    recently enacted federal education spending programs, reduced
    school budgets and reduced availability of discretionary funds,
    all of which could materially adversely affect our service
    revenue and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If
    national educational standards and assessments are adopted, or
    if existing metrics for applying state standards are revised,
    new competitors could more easily enter our markets or the
    demands in the markets we currently serve may change.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With the reauthorization of the Elementary and Secondary
    Education Act, known as No Child Left Behind, or NCLB, in 2001,
    Congress conditioned the receipt of federal funding for
    education on the establishment of educational standards, annual
    assessments and the achievement of adequate yearly progress
    milestones. These standards are established at the state level,
    and there are currently no national educational standards that
    are required to be assessed pursuant to NCLB. As part of NCLB,
    each state is required to establish clear performance standards
    for each grade level in reading, math and science in grades 3
    through 8, and for high school exit or end-of-course exams. Most
    of our service revenue from Study Island is concentrated in
    grades K-8, which accounted for approximately 87% of our service
    revenue in 2008. High school accounted for approximately 10% of
    Study Island service revenue for 2008. A shift to national
    performance standards or a reduction in the use of
    government-imposed standards may result in a material decline in
    demand in the markets that we serve.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    13
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our Study Island products are specifically built
    from the varying assessment standards in all 50&#160;states,
    which we believe differentiates them from the products offered
    by our competitors. If national standards and assessments
    replace the current state assessments, it would be easier for
    competitors to develop similar products tailored to one national
    set of standards rather than multiple state standards. If such
    an increase in competition occurred, our ability to compete
    effectively could be negatively impacted and our service revenue
    and profitability could materially decline.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If
    Congress does not reauthorize the Elementary and Secondary
    Education Act, commonly referred to as NCLB since the 2001
    reauthorization, or other legislation does not continue to
    mandate state educational standards and annual assessments,
    demand for our products and services could be materially
    adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    NCLB substantially increased the importance of
    <FONT style="white-space: nowrap">state-by-state</FONT>
    educational standards and assessments by making such standards
    and annual assessments a condition to receipt of federal
    educational funding. NCLB initially was scheduled for
    reauthorization in October 2008, but was extended until October
    2009 in order to allow the new U.S.&#160;presidential
    administration to impact the direction of any future
    reauthorization. If NCLB is not reauthorized or extended or does
    not maintain or increase the importance of
    <FONT style="white-space: nowrap">state-by-state</FONT>
    education standards and assessments, or if other federal or
    state legislation were to lessen the importance of such
    standards and assessments, our products and services could
    become significantly less valuable to our customers, and our
    service revenue and profitability could materially decline.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    recent rapid growth, the recent introduction of a number of our
    products and services and our entry into new markets make it
    difficult for us to evaluate our current and future business
    prospects, and we may be unable to effectively manage our growth
    and new initiatives, which may increase the risk of your
    investment and could harm our business, financial condition,
    results of operations and cash flow.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were founded in 2000 and began offering our Study Island
    products in 2001. Since our founding, we have continually
    launched new Study Island products, entered additional states
    and experienced rapid growth and increasing market share in the
    expanding market for online learning. We began offering our
    Study Island products in all 50&#160;states as of the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year, and we started offering TeacherWeb services after
    its acquisition in 2008. We launched our Northstar Learning
    product line in April 2009. Because many of our current products
    and services are relatively new and we have recently entered new
    markets, we may be unable to evaluate the relative success and
    future prospects, particularly in light of our goals to
    continually grow our existing and new customer base, expand our
    product and service offerings, acquire and integrate
    complementary businesses and enter new markets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our growth, recent product introductions and entry
    into new markets may place a significant strain on our resources
    and increase demands on our executive management, personnel and
    systems, and our operational, administrative and financial
    resources may be inadequate. We may also not be able to maintain
    or accelerate our current growth rate, effectively manage our
    expanding operations, or achieve planned growth on a timely or
    profitable basis, particularly if the number of students and
    educators using our products and services increase or their
    demands and needs change as our business expands. Our management
    will be required to expand its knowledge of diverse aspects of
    the education industry and maintain relationships with key
    customers across several sectors of the education market. If we
    are unable to manage our growth and expand operations
    effectively, we may experience operating inefficiencies, the
    quality of our products and services could deteriorate, and our
    business and results of operations could be materially adversely
    affected.
</DIV>

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    <BR>
    14
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    recent ongoing adoption of online learning in established
    education markets makes it difficult for us to evaluate our
    current and future business prospects. If web-based education
    fails to achieve widespread acceptance by students, parents,
    teachers, schools and other institutions, our growth and
    profitability may suffer.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The use of online learning technology is a relatively new
    approach in the traditional K-12 education testing and
    assessment markets. There can be no assurance that online
    products and services will achieve long-term success in the K-12
    or postsecondary education markets. Our success depends in part
    upon the continued adoption by teachers and school districts of
    technology-based education initiatives. Some academics and
    educators oppose online education in principle and have
    expressed concerns regarding the perceived loss of control over
    the education process that can result from offering content
    online. As a necessary corollary to the acceptance of web-based
    education in the classroom, our growth depends in part on
    parental acceptance of the role of technology in education and
    the availability of internet access in the home. If the
    acceptance of technology-based education does not continue to
    increase, our ability to continue to grow our business could be
    materially impaired.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    service revenue is primarily generated by sales of subscriptions
    to our Study Island products over the term of the subscription.
    Our customer renewal rates for subscriptions for Study Island,
    TeacherWeb and Northstar Learning are difficult to predict and
    declines in our sales of Study Island products or in renewal
    rate may materially adversely affect our business and results of
    operations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales of our Study Island products accounted for 96.8% and 93.1%
    of our service revenue in 2008 and in the first six months of
    2009, respectively, and we anticipate that revenue from sales of
    our Study Island products will continue to account for a
    substantial majority of our service revenue for the next few
    years. Our Study Island products are sold as subscriptions
    through purchase orders. The subscription period for our Study
    Island products is typically 12&#160;months and we occasionally
    sell multi-year subscriptions. In the case of certain sales, a
    limited number of additional months may be offered as a
    promotional incentive. Our Study Island customers are not
    obligated to renew their subscriptions at the end of the term,
    nor are they required to pay any penalties if they fail to renew
    their subscriptions. Because of constraints on the use of state,
    local and federal funding, most of our Study Island customers
    are only able to purchase subscriptions for 12&#160;month
    periods. As a result, our Study Island customers have no
    obligation to renew their subscriptions after the expiration of
    their initial subscription period. Our sales team begins the
    renewal process approximately six months prior to a subscription
    ending and consider this a renewal opportunity; however, our
    Study Island customers may choose to renew for fewer students or
    fewer products, which would reduce our service revenue. Sales of
    our Study Island products or services or our customer renewal
    rates may decline or fluctuate as a result of a number of
    factors, including decreased demand, adverse regulatory actions,
    decreased school funding, pricing pressures, competitive factors
    or any other reason. These and other factors that have affected
    our Study Island sales or customer renewal rates in the past are
    not predictive of the future, and, as a result, we cannot
    accurately predict customer renewal rates. If sales to new Study
    Island customers decline or our Study Island customers do not
    renew their subscriptions at previous levels, our service
    revenue may decline, which would negatively impact our business,
    financial condition, results of operations and cash flow.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our Study
    Island products are predominantly purchased by individual
    schools, and any decisions at the district or state level to use
    the products and services of one of our competitors, or to limit
    or reduce the use of web-based educational products, could
    materially adversely affect our ability to attract and retain
    customers.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The sales model for our Study Island products relies heavily on
    word-of-mouth referrals among teachers and school administrators
    who purchase our products and services for use by their
    students. If policymakers at the district or state level
    determine that our products and services are not the best option
    for schools in their district or state, or if they decide to
    decrease or discontinue the use of web-based educational
    products, individual teachers and school administrators may lose
    the ability to decide what, if any, online educational products
    and services they use. Such action may result in the loss of our
    customers and may materially limit our ability to attract new
    customers. In addition, our competitors may more successfully
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    15
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    market their products and services at the district or state
    level, which could result in a decline in sales of our products
    and services.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Fluctuations
    in sales or renewals may not be immediately reflected in our
    results of operations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We recognize service revenue from our customers monthly over the
    term of each of their subscriptions, which is typically
    12&#160;months, and we occasionally sell multi-year
    subscriptions. In the case of certain sales, a limited number of
    additional months may be offered as a promotional incentive. As
    a result, substantially all of the service revenue we recognize
    in any period is deferred revenue from subscriptions purchased
    during previous periods. Consequently, a decline in new sales or
    subscription renewals in any particular period will not
    necessarily be fully reflected in the service revenue in that
    period and will negatively affect our revenue in future periods.
    In addition, we may be unable to adjust our cost structure to
    reflect this reduced service revenue. Accordingly, the effect of
    significant downturns in sales or subscription renewals and
    market acceptance of our products and services may not be fully
    reflected in our results of operations until future periods. Our
    subscription model also makes it difficult for us to rapidly
    increase our service revenue through additional sales in any
    period, as service revenue from new customers would be
    recognized ratably over the applicable subscription term.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    business is subject to seasonal fluctuations, which may cause
    our cash flow to fluctuate from quarter-to-quarter and
    materially adversely impact the market price of our common
    stock.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our cash flow may fluctuate as a result of seasonal variations
    in our business, principally due to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our customers&#146; spending patterns, including shifts in the
    timing of when individual schools or districts purchase our
    products and services;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the timing of school districts&#146; funding sources and
    budgeting cycles;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the timing of the release of federal funds to states, and the
    subsequent timing of states&#146; release of such funds to
    districts and schools;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the timing of expirations and renewals of subscriptions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the timing of special promotions and discounts, including
    additional free months of subscriptions; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the timing of acquisitions and non-recurring charges incurred in
    connection with acquisitions and extraordinary transactions.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A significant percentage of our new sales and subscription
    renewals occur in the third quarter because teachers and school
    administrators typically make purchases for the new academic
    year at the beginning of their district&#146;s fiscal year,
    which is usually July&#160;1. The fourth calendar quarter has
    historically produced the second highest level of sales and
    renewals, followed by the second quarter and finally the first
    quarter. Because payment in full for subscriptions is typically
    due at the time of subscription or renewal, and our operating
    expense, of which labor and sales commissions make up the
    largest portion, historically have been fairly consistent
    throughout the year, we typically have higher cash flow in the
    quarters with stronger sales and renewals. We expect quarterly
    fluctuations in our cash flow to continue.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">System
    disruptions, vulnerability from security risks to our networks,
    databases and online applications and an inability to expand and
    upgrade our systems in a timely manner to meet unexpected
    increases in demand could damage our reputation, impact our
    ability to generate service revenue and limit our ability to
    attract and retain customers.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The performance and reliability of our technology infrastructure
    is critical to our business. Any failure to maintain
    satisfactory online product performance, reliability, security
    or availability of our web platform infrastructure may
    significantly reduce customer satisfaction and damage our
    reputation, which would
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    16
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    negatively impact our ability to attract new customers and
    obtain customer renewals. The risks associated with our web
    platform include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    breakdowns or system failures resulting in a prolonged shutdown
    of our servers, including failures attributable to power
    shutdowns or attempts to gain unauthorized access to our
    systems, which may cause loss or corruption of data or
    malfunction of software or hardware;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    disruption or failure in our colocation provider, which would
    make it difficult or impossible for students and teachers to log
    on to our websites;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    damage from fire, flood, tornado, power loss or
    telecommunications failures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    infiltration by hackers or other unauthorized persons; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    any infection by or spread of computer viruses.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, increases in the volume of traffic on our websites
    could strain the capacity of our existing infrastructure, which
    could lead to slower response times or system failures. This
    would cause a disruption or suspension of our product and
    service offerings.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any web platform interruption or inadequacy that causes
    performance issues or interruptions in the availability of our
    websites could reduce customer satisfaction and result in a
    reduction in the number of customers using our products and
    services. If sustained or repeated, these performance issues
    could reduce the attractiveness of our websites and products and
    services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may need to incur additional costs to upgrade our computer
    systems in order to accommodate system disruptions, security
    risks and increased demand if we anticipate that our systems
    cannot handle higher volumes of traffic in the future. However,
    the costs and complexities involved in expanding and upgrading
    our systems may prevent us from doing so in a timely manner and
    may prevent us from adequately meeting the demand placed on our
    systems.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Any
    significant interruption in the operations of our data centers
    could cause a loss of data and disrupt our ability to manage our
    network hardware and software and technological infrastructure,
    and any significant interruption in the operations of our call
    center could disrupt our ability to respond to requests for help
    or service and process orders in a timely manner.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of our web platform servers and routers, including backup
    servers, are currently located in colocation facilities in
    Dallas, Texas. As part of our disaster recovery arrangements, we
    intend to replicate all of our customers&#146; data in a
    separate backup facility near Chicago, Illinois. If we are not
    successful in implementing this plan, we will face additional
    risks relating to the central location of our servers. Any
    disruption of operations of or damage to these servers could
    materially harm our ability to operate our business. We also may
    need to make additional investments to improve the performance
    of our platform and prevent disruption of our services. Any
    disruption or significant interruption in the operations of our
    data centers may result in a loss of customer satisfaction and
    limit our ability to retain and attract customers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We rely in part on our call center to generate sales leads and
    maintain a high level of customer service. Any significant
    interruption in the operation of our call center, including an
    interruption caused by our failure to expand or upgrade our
    systems or to manage these expansions or upgrades, could reduce
    our ability to receive and respond to requests for help or
    service, process orders and provide products and services, which
    could result in lost or cancelled sales and damage to our
    reputation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We are
    subject to laws and regulations as a result of our collection
    and use of personal information, particularly from our K-12
    student users, and any violations of such laws or regulations,
    or any breach, theft or loss of such information, could
    materially adversely affect our reputation and operations and
    expose us to costly litigation.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our products and services require the disclosure of student
    information by educational institutions and credit card
    information by some customers. The vast majority of our Study
    Island users are minors. The Child
</DIV>

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    <BR>
    17
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Online Protection Act and the Children&#146;s Online Privacy
    Protection Act restrict the distribution of materials considered
    harmful to children and impose additional restrictions on the
    ability of online services to collect information from minors.
    Many states have also passed laws requiring notification to
    users when there is a security breach of personal data.
    Additionally, the Family Educational Rights and Privacy Act, or
    FERPA, protects the privacy and restricts the disclosure of
    student information, and we must remain FERPA-compliant through
    security policies, processes, systems and controls, including
    using software that detects hackers and other unauthorized or
    illegal activities. We cannot predict whether new technological
    developments could circumvent these security measures. If the
    security measures that we use to protect personal or student
    information or credit card information are ineffective, we may
    be subject to liability, including claims for invasion of
    privacy, impersonation, unauthorized purchases with credit card
    information or other similar claims. In addition, the Federal
    Trade Commission and several states have investigated the use of
    personal information by certain internet companies. We could
    incur significant expense and our business could be materially
    adversely affected if new regulations regarding use of personal
    information are introduced, if our security measures are
    ineffective or if our privacy practices are investigated.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Domestic
    and foreign government regulation relating to the internet or
    our products and services could cause us to incur significant
    expense, and failure to comply with applicable regulations could
    make our business less efficient or even impossible to continue
    to operate.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As web-based commerce continues to evolve, increasing regulation
    by federal, state or foreign agencies becomes more likely. In
    addition, taxation of services provided over the internet or
    other charges imposed by government agencies or by private
    organizations for accessing the internet may also be imposed.
    Any regulation imposing greater fees for internet use or
    restricting information exchange over the internet could result
    in a decline in the use of the internet and the viability of
    internet-based services, which could materially harm our
    business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We may
    not be able to develop new products and services or expand our
    existing product lines in a timely and cost effective
    manner.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of our Study Island products is built from specific state
    standards for a particular grade level and subject in the K-12
    market. With these standards continually changing and our
    release of new Study Island products, as well as the launch of
    our new Northstar Learning product line, our product and content
    development teams may not be able to respond to changing market
    requirements on a timely basis. We intend to launch upgraded
    versions of our Study Island products in January 2010, but we
    may be unable to do so in a timely and cost effective manner
    that appropriately meets market demand. In addition, we are
    entering new markets, such as the postsecondary and
    international markets, which will place new demands on our
    product and content development teams. These are new, unproven
    markets for us, and if we are not able to generate sufficient
    new revenue to exceed the incremental costs associated with
    developing and delivering new products and entering new markets,
    our results of operations may be materially and adversely
    affected. Furthermore, we may be unable to develop and offer
    additional products and services on commercially reasonable
    terms and in a timely manner, if at all, or maintain the quality
    and consistency necessary to keep pace with changes in market
    requirements and respond to competitive pressures. A failure to
    do any of these things may result in a material decline in our
    service revenue and may prevent us from maintaining
    profitability.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we
    acquire or invest in any companies, services or technologies in
    the future, they could prove difficult to integrate, disrupt our
    business, dilute stockholder value and materially adversely
    affect our results of operations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of our growth strategy, we may acquire or invest in
    complementary companies, services and technologies. We cannot
    assure you that we will be able to consummate any such
    acquisitions or investments on favorable terms or at all. If we
    fail to properly evaluate and execute our acquisitions or
    investments, our business and prospects may be seriously harmed.
    Such acquisitions and investments involve numerous risks,
    including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    difficulties in integrating operations, technologies, services
    and personnel;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    18
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    diversion of financial and managerial resources from existing
    operations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    risk of entering new markets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    potential write-offs of acquired assets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    significant one-time costs, including banking, legal and
    accounting fees and payment of severance packages;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    potential loss of key employees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    inability to generate sufficient service revenue to offset
    acquisition or investment costs; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    delays in customer purchases due to uncertainty.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with our acquisitions or investments, we may also
    incur additional debt and related interest expense, as well as
    unforeseen liabilities, which could have a material adverse
    effect on our business, financial condition and results of
    operations. Furthermore, we may issue additional equity in
    connection with these transactions, which would result in
    dilution to our existing shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    unable to maintain and enhance our brand identity, our business
    and results of operations may suffer.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The continued development of our brand identity is important to
    our business, and expanding brand awareness is critical to
    attracting and retaining our customers. Although our Study
    Island and TeacherWeb brands have existed since 2000, our
    Northstar Learning and Archipelago Learning brands are
    relatively new, having launched in April 2009 and August 2009,
    respectively. Our existing and potential customers may not be
    aware of the relationship of our brands with one and another,
    particularly Archipelago Learning serving as an umbrella for
    each of our products and Northstar Learning serving as a
    postsecondary education product line. Our newer brands are
    unproven and may not be successfully received by our customers.
    In addition, we have launched our Study Island products in a
    number of new states over the last two years and intend to
    launch Study Island products in international markets in the
    future. As we continue to increase subscriptions and extend our
    geographic reach, maintaining quality and consistency across all
    of our products and services may become more difficult to
    achieve, and any significant and well-publicized failure to
    maintain this quality and consistency will have a detrimental
    effect on our brand. We cannot provide assurances that our sales
    and marketing efforts will be successful in further promoting
    our brand in a competitive and cost-effective manner. If we are
    unable to maintain and enhance our brand recognition and
    increase awareness of our products and services, or if we incur
    excessive sales and marketing expense, our business and results
    of operations could be materially adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    future growth and profitability will depend in large part upon
    the effectiveness and efficiency of our marketing expenditures
    in recruiting new customers.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our future growth and profitability will depend in large part
    upon the effectiveness and efficiency of our marketing
    expenditures, including our ability to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    create greater awareness of our brands;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    select the right market, media and specific media vehicles in
    which to advertise;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    identify the most effective and efficient level of spending in
    each market, media and specific media vehicle;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    determine the appropriate creative message and media mix for
    advertising, marketing and promotional expenditures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    effectively manage marketing costs, including creative and media
    expense, in order to maintain acceptable customer acquisition
    costs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    generate leads for sales, including obtaining educator lists in
    a cost-effective manner;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    19
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    drive traffic to our website; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    convert customer inquiries into actual orders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our planned marketing expenditures may not result in increased
    service revenue or generate sufficient levels of product and
    brand awareness, and we may not be able to increase our net
    sales at the same rate as we increase our advertising
    expenditures.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We
    operate in a highly competitive market subject to rapid
    technological changes, and increasing competition could lead to
    pricing pressures, reduced operating margins, loss of market
    share and increased capital expenditures.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The markets for our products and services are highly
    competitive, and we expect increased competition in the future
    that could adversely affect our service revenue and market
    share. Our current competitors include but are not limited to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    providers of online and offline supplemental instructional
    materials for the core subject areas of reading, mathematics,
    science and social studies for K-12 institutions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    companies that provide K-12-oriented software and online-based
    educational assessment and remediation products and services to
    students, educators, parents and educational institutions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the assessment divisions of established education publishers,
    including Pearson Education, Inc., The McGraw-Hill Companies and
    Houghton Mifflin Harcourt Company;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    providers of online and offline test preparation materials;
</TD>
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<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    traditional print textbook and workbook companies that publish
    K-12 core subject educational materials, standardized test
    preparation materials or paper and pencil assessment tools;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    summative assessment companies, which traditionally assess
    student learning at the end of a class period, that have
    expanded their line to include products that provide periodic
    assessment in the classroom to gauge student learning and inform
    instruction, also known as formative assessment;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    non-profit and membership educational organizations and
    government agencies that offer online and offline products and
    services, including in some cases at no cost, to assist
    individuals in standards mastery and test preparation; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    website portal and teacher productivity programs designed to
    help educators create and manage classroom and school websites
    and in-house website development efforts at the class, school
    and district level.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Some of our competitors may have more resources than we do, and
    several of the largest K-12 educational publishers may have more
    experience, larger customer bases and greater brand recognition
    in the markets we serve. Further, larger established companies
    with high brand recognition and extensive experience providing
    various educational products to the K-12 market may develop
    online products and services that are competitive with our core
    products and services. These competitors may be able to devote
    greater resources than us to the development, promotion and sale
    of their services and respond more quickly than we can to new
    technologies or changes in customer requirements or preferences.
    We may not be able to compete effectively with current or future
    competitors, especially those with significantly greater
    resources or more established customer bases, which may
    materially adversely affect our sales and our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If our
    products or services contain errors, new product releases could
    be delayed or our services could be disrupted. As a result, our
    customers may choose not to renew their subscriptions and our
    business could be materially adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If our products or services contain defects, errors or security
    vulnerabilities, our reputation could be harmed, which could
    result in significant costs to us and impair our ability to sell
    our products and services in
</DIV>

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    <BR>
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    the future. Because our products and services are complex and
    because we do not &#147;pre-launch&#148; any of our products or
    upgrades to any third parties prior to the official launch, they
    may contain undetected errors or defects, known as bugs. Bugs
    can be detected at any point in time, but are more common when a
    new product or service is introduced or when new versions are
    released. We expect that, despite our testing, errors will be
    found in the future. If an error occurs, our product and service
    offerings may be disrupted, causing delays or interruptions.
    Significant errors, delays or disruptions could lead to:
</DIV>

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    decreases in customer satisfaction with and loyalty toward our
    products and services;
</TD>
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    delays in or loss of market acceptance of our products and
    services;
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    diversion of our resources;
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    a lower rate of subscription renewals or upgrades;
</TD>
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    injury to our reputation; or
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    increased service expense or payment of damages.
</TD>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    unable to adapt our products and services to technological
    changes, to the emergence of new computing devices and to more
    sophisticated online services, we may lose market share and
    service revenue, and our business could suffer.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We need to anticipate, develop and introduce new products,
    services and applications on a timely and cost effective basis
    that keeps pace with technological developments and changing
    customer needs. For example, the number of individuals who
    access the internet through devices other than a personal
    computer, such as personal digital assistants, mobile
    telephones, televisions and set-top box devices, has increased
    dramatically, and this trend is likely to continue. Our products
    and services were designed for internet use on desktop and
    laptop computers. The lower resolution, functionality and memory
    associated with alternative devices currently available may make
    the use of our products and services through such devices
    difficult. We have no experience to date in operating versions
    of our products and services developed or optimized for users of
    alternative devices. Accordingly, it is difficult to predict the
    problems we may encounter in developing versions of our products
    and services for use on these alternative devices, and we may
    need to devote significant resources to the creation, support
    and maintenance of such versions. If we fail to develop or sell
    products and services cost effectively that respond to these or
    other technological developments and changing customer needs, we
    may lose market share and service revenue and our business could
    materially suffer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Protection
    of our intellectual property is limited, and any misuse of our
    intellectual property by others, including software piracy,
    could harm our business, reputation and competitive
    position.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our trademarks, copyrights, trade secrets, trade dress and
    designs are valuable and integral to our success and competitive
    position. However, we cannot assure you that we will be able to
    adequately protect our proprietary rights through reliance on a
    combination of copyrights, trademarks, trade secrets,
    confidentiality procedures, contractual provisions and technical
    measures. Protection of trade secrets and other intellectual
    property rights in the markets in which we operate and compete
    is highly uncertain and may involve complex legal questions. We
    cannot completely prevent the unauthorized use or infringement
    of our intellectual property rights, as such prevention is
    inherently difficult. Despite enforcement efforts against
    software piracy, we lose significant service revenue due to
    illegal use of our software. If piracy activities increase, they
    may further harm our business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also expect that the more successful we are, the more likely
    that competitors will try to illegally use our proprietary
    information and develop products that are similar to ours, which
    may infringe on our proprietary rights. In addition, we could
    potentially lose future trade secret protection for our source
    code if any unauthorized disclosure of such code occurs. The
    loss of future trade secret protection could make it easier for
    third parties to compete with our products by copying
    functionality. Any changes in, or unexpected interpretations of,
    the trade secret and other intellectual property laws in any
    country in which we operate may compromise our ability to
    enforce our trade secret and intellectual property rights.
    Costly and time-consuming
</DIV>

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    litigation could be necessary to enforce and determine the scope
    of our confidential information and trade secret protection. If
    we are unable to protect our proprietary rights or if third
    parties independently develop or gain access to our or similar
    technologies, our business, service revenue, reputation and
    competitive position could be materially adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We may be
    sued for infringing the intellectual property rights of others
    and such actions would be costly to defend, could require us to
    pay damages or enter into royalty or license agreements with
    third parties and could limit our ability or increase our costs
    to use certain content or technologies in the future.</FONT></B>
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may be sued for infringing the intellectual property rights
    of others or be subject to litigation based on allegations of
    infringement or other violations of intellectual property
    rights. Regardless of merits, intellectual property claims are
    often time-consuming and expensive to litigate and settle. In
    addition, to the extent claims against us are successful, we may
    have to pay substantive monetary damages or discontinue any of
    our products, services or practices that are found to be in
    violation of another party&#146;s rights. We also may have to
    seek a license and make royalty payments to continue offering
    our products and services or following such practices, which may
    significantly increase our operating expense.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    customers can input their own content to our websites. We have
    limited control over this content, which could expose us to
    liability from third parties.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of a subscription to Study Island, TeacherWeb or
    Northstar Learning, our customers are able to input their own
    content onto our websites, which may be accessible by other
    users who share the same subscription as the creator of the
    content. For example, educators and students may post articles
    or other materials on class discussion boards, which may give
    rise to claims from third parties for the unauthorized
    duplication or distribution of this material. We may be exposed
    to liability, including fines and costly litigation, if the
    content violates the intellectual property rights of a third
    party, or otherwise violates any law or regulation, including
    FERPA, the Child Online Protection Act and the Children&#146;s
    Online Privacy Protection Act.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    confidentiality, non-disclosure and other agreements we use to
    protect our products, trade secrets and proprietary information
    may prove unenforceable or inadequate.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We protect our products, trade secrets and proprietary
    information, in part, by requiring all of our employees to enter
    into agreements providing for the maintenance of confidentiality
    and the assignment of rights to inventions made by them while
    employed by us. We also enter into non-disclosure agreements
    with our technical consultants, customers, vendors and resellers
    to protect our confidential and proprietary information. We
    cannot assure you that our confidentiality agreements with our
    employees, consultants and other third parties will not be
    breached, that we will be able to effectively enforce these
    agreements, that we will have adequate remedies for any breach,
    or that our trade secrets and other proprietary information will
    not be disclosed or will otherwise be protected.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also rely on contractual and license agreements with third
    parties in connection with their use of our products and
    technology. There is no guarantee that such parties will abide
    by the terms of such agreements or that we will be able to
    adequately enforce our rights, in part because we rely, in many
    instances, on &#147;click-wrap&#148; licenses, which are
    licenses that can only be read and accepted online and are not
    negotiated or signed by individual licensees. Accordingly, some
    provisions of our licenses, including provisions protecting
    against unauthorized use, copying, transfer, resale and
    disclosure of the licensed software program, may be
    unenforceable under the laws of several jurisdictions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We have
    not registered copyrights for all of our products, which may
    limit our ability to enforce them.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have not registered our copyrights in all of our software,
    written materials, website information, designs or other
    copyrightable works. The United States Copyright Act
    automatically protects all of our copyrightable works, but
    without registration we cannot enforce those copyrights against
    infringers or seek certain statutory remedies for any such
    infringement. Preventing others from copying our products,
    written
</DIV>

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    materials and other copyrightable works is important to our
    overall success in the marketplace. In the event we decide to
    enforce any of our copyrights against infringers, we will first
    be required to register the relevant copyrights, and we cannot
    be sure that all of the material for which we seek copyright
    registration would be registrable in whole or in part, or that
    once registered, we would be successful in bringing a copyright
    claim against any such infringers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We must
    monitor and protect our internet domain names to preserve their
    value. We may be unable to prevent third parties from acquiring
    domain names that are similar to, infringe on or otherwise
    decrease the value of our trademarks.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We own several domain names that include the terms Study Island,
    Archipelago Learning, TeacherWeb and Northstar Learning, among
    others. Third parties may acquire substantially similar domain
    names that decrease the value of our domain names and trademarks
    and other proprietary rights which may hurt our business.
    Moreover, the regulation of domain names in the United States
    and foreign countries is subject to change. Governing bodies
    could appoint additional domain name registrars or modify the
    requirements for holding domain names. Governing bodies could
    also establish additional &#147;top-level&#148; domains, which
    are the portion of the web address that appears to the right of
    the &#147;dot,&#148; such as &#147;com,&#148; &#147;net,&#148;
    &#147;gov&#148; or &#147;org.&#148; As a result, we may not
    maintain exclusive rights to all potentially relevant domain
    names in the United States or in other countries in which we
    conduct business, which could harm our business and reputation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We do not
    own all of the software, content and other technologies used in
    our products and services.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Some of our products and services include intellectual property
    owned by third parties, including licensed content for reading
    passages and other educational content. From time to time we may
    be required to renegotiate with these third parties or negotiate
    with new third parties to include or continue using their
    technology or content in our existing products, in new versions
    of our existing products or in wholly new products. We may not
    be able to negotiate or renegotiate licenses on commercially
    reasonable terms, or at all, and the third-party software we use
    may not be appropriately supported, maintained or enhanced by
    the licensors. If we are unable to obtain the rights necessary
    to use or continue to use third-party technology or content in
    our products and services, or if those third parties are unable
    to support, maintain and enhance their software, we could
    experience increased costs or delays or reductions in product
    releases and functionality until equivalent software or content
    can be developed, identified, licensed and integrated.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    future success depends on our ability to retain our key
    employees.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are dependent on the services of Tim McEwen, our Chief
    Executive Officer, James Walburg, our Chief Financial Officer,
    Ray Lowrey, our Chief Technology Officer, Julie Huston, our Vice
    President of Sales, our other vice presidents and senior
    editors, and other members of our senior management team. Other
    than non-compete provisions of limited duration included in
    employment agreements that we have with certain executives, we
    do not generally seek non-compete agreements with key personnel,
    and they may leave and subsequently compete against us. The loss
    of service of any of our senior management team, particularly
    those who are not party to employment agreements with us, or our
    failure to attract and retain other qualified and experienced
    personnel on acceptable terms, could have a material adverse
    effect on our business.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We may be
    unable to attract and retain the skilled employees needed to
    sustain and grow our business.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our success to date has largely depended on, and will continue
    to depend on, the skills, efforts and motivations of our
    executive team and employees, who generally have significant
    experience with our company and within the education industry.
    Our success also depends largely on our ability to attract and
    retain highly qualified IT engineers and programmers, content
    writers and editors, sales and marketing managers and corporate
    management personnel. We may experience difficulties in locating
    and hiring qualified personnel and in retaining such personnel
    once hired, which may materially and adversely affect our
    business.
</DIV>

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    <B><FONT style="font-family: 'Times New Roman', Times">We may
    have exposure to greater than anticipated tax
    liabilities.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are and have been subject to income taxes and other taxes in
    a variety of jurisdictions and are subject to review by both
    various state and federal taxation authorities. The
    determination of our provision for income taxes and other tax
    liabilities requires significant judgment and the ultimate tax
    outcome may differ from the amounts recorded in our consolidated
    financial statements, which may materially affect our financial
    results in the period or periods for which such determination is
    made.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Although
    we do not currently transact a material amount of business in
    foreign countries, we intend to expand into international
    markets, which will subject us to additional economic,
    operational and political risks that could increase our costs
    and make it difficult for us to continue to operate
    profitably.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to launch Study Island products in Canada and other
    international markets. The addition of international operations
    may require significant expenditure of financial and management
    resources and result in increased administrative and compliance
    costs. As a result of such expansion, we will be increasingly
    subject to the risks inherent in conducting business
    internationally, including:
</DIV>

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    foreign currency fluctuations, which could result in reduced
    service revenue and increased operating expense;
</TD>
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    potentially longer payment and sales cycles;
</TD>
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    increased difficulty in collecting accounts receivable;
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    the effect of applicable foreign tax structures, including tax
    rates that may be higher than tax rates in the United States or
    taxes that may be duplicative of those imposed in the United
    States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    tariffs and trade barriers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    general economic and political conditions in each country;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    inadequate intellectual property protection in foreign countries;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    uncertainty regarding liability for information retrieved and
    replicated in foreign countries;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the difficulties and increased expense in complying with a
    variety of domestic and foreign laws, regulations and trade
    standards, including the Foreign Corrupt Practices Act; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    unexpected changes in regulatory requirements.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    current global financial crisis and adverse worldwide economic
    conditions may have significant effects on our business,
    financial condition and results of operations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The current global financial crisis&#160;- which has included,
    among other things, significant reductions in available capital
    and liquidity, substantial reductions
    <FONT style="white-space: nowrap">and/or</FONT>
    fluctuations in equity and currency values and a worldwide
    recession, the extent of which is likely to be significant and
    prolonged&#160;- may materially adversely affect our business.
    We have already begun to experience some weakening in demand for
    our products and services, and we cannot predict whether it will
    continue or increase. In an economic downturn like the current
    one, which is characterized by higher unemployment, lower family
    income, lower corporate earnings, lower business investment and
    lower consumer spending, the demand for our products and
    services may be materially adversely affected. See
    &#147;&#151;&#160;Most of our customers are public schools,
    which rely on state, local and federal funding. If any state,
    local or federal funding is materially reduced, our public
    school customers may no longer be able to afford to purchase our
    products and services, and our business, financial condition,
    results of operations and cash flow could be materially
    adversely affected.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The credit markets have been experiencing extreme volatility and
    disruption since August 2007. The current global financial
    crisis affecting the banking system and the possibility that
    financial institutions may consolidate or fail has resulted in a
    tightening of the credit markets, which could impair our ability
    to refinance our existing debt, to draw upon our revolving
    credit facility or incur additional debt, to seek other
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    24
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    funding sources to meet our liquidity needs or to fund planned
    expansion. Furthermore, the tightening of the credit markets may
    delay or prevent our customers from securing funding adequate to
    operate their businesses and purchase our products and services,
    leading to an increase in our bad debt levels.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We may
    need additional capital in the future, but there is no assurance
    that funds will be available on acceptable terms, or at
    all.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may need to raise additional funds in order to achieve growth
    or fund other business initiatives. This financing may not be
    available in sufficient amounts or on terms acceptable to us and
    may be dilutive to existing shareholders if raised through
    additional equity offerings. Additionally, any securities issued
    to raise funds may have rights, preferences or privileges senior
    to those of existing shareholders. If adequate funds are not
    available or are not available on acceptable terms, our ability
    to expand, develop or enhance services or products, or respond
    to competitive pressures may be materially limited.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    existing indebtedness could adversely affect our financial
    condition and we may not be able to fulfill our debt
    obligations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009, Archipelago Learning, LLC had
    outstanding term loans in an aggregate principal amount equal to
    $68.4&#160;million and no revolving credit loans outstanding
    under its revolving credit facility which expires in November
    2013. The agreements governing this credit facility contain
    various covenants that limit our ability to, among other things:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    incur or guarantee additional indebtedness;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    pay dividends or make other distributions to our shareholders;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    make restricted payments;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    incur liens;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    engage in transactions with affiliates; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    enter into business combinations.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These restrictions could limit our ability to withstand general
    economic downturns that could affect our business, obtain future
    financing, make acquisitions or capital expenditures, conduct
    operations or otherwise capitalize on business opportunities
    that may arise. Additionally, we will use a significant portion
    of our cash flow to pay interest on our outstanding debt,
    limiting the amount available for working capital, capital
    expenditures and other general corporate purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may be more vulnerable to adverse economic conditions than
    less leveraged competitors and thus less able to withstand
    competitive pressures. If our cash flow is inadequate to make
    interest and principal payments on our debt, we might have to
    refinance our indebtedness or issue additional equity or other
    securities and may not be successful in those efforts or may not
    obtain terms favorable to us. Additionally, our ability to
    finance working capital needs and general corporate purposes for
    the public and private markets, as well as the associated cost
    of funding, is dependent, in part, on our credit ratings, which
    may be adversely affected if we experience declining service
    revenue. Any of these events could reduce our ability to
    generate cash available for investment or debt repayment or to
    make improvements or respond to events that would enhance
    profitability. We may incur significantly more debt in the
    future, which will increase each of the foregoing risks related
    to our indebtedness. In addition, the obligations under our
    credit facility are guaranteed by AL Midco, LLC, or AL Midco,
    and TeacherWeb, and are secured by liens on substantially all of
    the assets owned by Archipelago Learning, LLC, AL Midco and
    TeacherWeb. For a more detailed description of our credit
    facility, see &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operation&#160;&#151; Credit
    Facility&#148; and &#147;Description of Material
    Indebtedness.&#148;
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    25
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to Our Common Stock and this Offering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We expect
    that our stock price will fluctuate significantly, and you may
    not be able to resell your shares at or above the initial public
    offering price.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The trading price of our common stock is likely to be volatile
    and subject to wide price fluctuations in response to various
    factors, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    market conditions in the broader stock market;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    actual or anticipated fluctuations in our quarterly financial
    and results of operations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    introduction of new products or services by us or our
    competitors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    issuance of new or changed securities analysts&#146; reports or
    recommendations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    investor perceptions of us and the educational industry;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    sales, or anticipated sales, of large blocks of our stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    additions or departures of key personnel;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    regulatory or political developments;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    litigation and governmental investigations; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changing economic conditions.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These and other factors may cause the market price and demand
    for our common stock to fluctuate substantially, which may limit
    or prevent investors from readily selling their shares of common
    stock and may otherwise negatively affect the liquidity of our
    common stock. In addition, in the past, when the market price of
    a stock has been volatile, holders of that stock have sometimes
    instituted securities class action litigation against the
    company that issued the stock. If any of our stockholders were
    to bring a lawsuit against us, we could incur substantial costs
    defending the lawsuit. Such a lawsuit could also divert the time
    and attention of our management from our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">There is
    no existing market for our common stock, and we do not know if
    one will develop to provide you with adequate
    liquidity.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has been no public market for
    shares of our common stock. We cannot predict the extent to
    which investor interest in our company will lead to the
    development of a trading market on the New York Stock Exchange,
    also called the NYSE, or The NASDAQ Stock Market LLC, also
    called Nasdaq, or how liquid that market may become. If an
    active trading market does not develop or is not sustained, you
    may have difficulty selling any of our common stock that you
    purchase at an attractive price or at all. The initial public
    offering price of shares of our common stock will be determined
    by negotiation between us and the underwriters and may not be
    indicative of prices that will prevail following the completion
    of this offering. The market price of shares of our common stock
    may decline below the initial public offering price, and you may
    not be able to resell your shares of our common stock at or
    above the initial offering price.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If
    securities or industry analysts do not publish research or
    reports about our business, if they adversely change their
    recommendations regarding our stock or if our results of
    operations do not meet their expectations, our stock price and
    trading volume could decline.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The trading market for our common stock will be influenced by
    the research and reports that industry or securities analysts
    publish about us or our business. If one or more of these
    analysts cease coverage of our company or fail to publish
    reports on us regularly, we could lose visibility in the
    financial markets, which in turn could cause our stock price or
    trading volume to decline. Moreover, if one or more of the
    analysts who cover us downgrade recommendations regarding our
    stock, or if our results of operations do not meet their
    expectations, our stock price could decline and such decline
    could be material.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    26
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sales of
    substantial amounts of our common stock in the public markets,
    or the perception that such sales might occur, could reduce the
    price of our common stock and may dilute your voting power and
    your ownership interest in us.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If our existing shareholders sell substantial amounts of our
    common stock in the public market following this offering, the
    market price of our common stock could decrease significantly.
    The perception in the public market that our existing
    shareholders might sell shares of common stock could also
    depress our market price. Upon the consummation of this
    offering, we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding. Our directors, executive officers,
    the selling stockholders and substantially all of our other
    stockholders will be subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described in &#147;Underwriting&#148; and are subject
    to the Rule&#160;144 holding period requirements described in
    &#147;Shares Eligible for Future Sale.&#148; After these
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements have expired and holding periods have elapsed and the
    <FONT style="white-space: nowrap">lock-up</FONT>
    periods set forth in our stockholders&#146; agreement to be
    entered into in connection with this offering have
    expired,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;additional
    shares will be eligible for sale in the public market. The
    market price of shares of our common stock may drop
    significantly when the restrictions on resale by our existing
    shareholders lapse. A decline in the price of shares of our
    common stock might impede our ability to raise capital through
    the issuance of additional shares of our common stock or other
    equity securities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">You will
    experience immediate and substantial book value dilution after
    this offering.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The initial public offering price of our common stock will be
    substantially higher than the pro forma net tangible book value
    per share of the outstanding common stock immediately after the
    offering. Based on an assumed initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share (the midpoint of the
    price range set forth on the cover of this prospectus) and our
    net tangible book value on a pro forma basis as of June&#160;30,
    2009, if you purchase our common stock in this offering, you
    will suffer immediate dilution in net tangible book value per
    share of approximately $&#160;&#160;&#160;&#160;&#160; per
    share. See &#147;Dilution.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Insiders
    will continue to have substantial control over us after this
    offering and could limit your ability to influence the outcome
    of key transactions, including a change of control.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our principal stockholders, directors and executive officers and
    entities affiliated with them will own
    approximately&#160;&#160;&#160;&#160;&#160;% of the outstanding
    shares of our common stock after this offering. As a result,
    these stockholders, if acting together, would be able to
    influence or control matters requiring approval by our
    stockholders, including the election of directors and the
    approval of mergers or other extraordinary transactions. They
    may also have interests that differ from yours and may vote in a
    way with which you disagree and which may be adverse to your
    interests. The concentration of ownership may have the effect of
    delaying, preventing or deterring a change of control of our
    company, could deprive our stockholders of an opportunity to
    receive a premium for their common stock as part of a sale of
    our company may materially adversely affect the market price of
    our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We are a
    &#147;controlled company&#148; within the meaning of the NYSE
    and Nasdaq rules and will qualify for, and intend to rely on,
    exemptions from certain corporate governance requirements. As a
    result, you will not have the same protections afforded to
    shareholders of companies that are subject to such
    requirements.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After completion of this offering, Providence Equity Partners
    will continue to control a majority of the voting power of our
    outstanding common stock. As a result, we are a &#147;controlled
    company&#148; within the meaning of the NYSE and Nasdaq
    corporate governance standards. Under these rules, a
    &#147;controlled company&#148; may elect not to comply with
    certain corporate governance requirements, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement that a majority of the board of directors
    consist of independent directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement that we have a nominating/corporate governance
    committee that is composed entirely of independent directors
    with a written charter addressing the committee&#146;s purpose
    and responsibilities;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    27
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement that we have a compensation committee that is
    composed entirely of independent directors with a written
    charter addressing the committee&#146;s purpose and
    responsibilities; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement for an annual performance evaluation of the
    nominating and corporate governance and compensation committees.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following this offering, we intend to utilize these exemptions.
    As a result, we will not have a majority of independent
    directors, our nominating and corporate governance committee,
    and compensation committee will not consist entirely of
    independent directors and such committees will not be subject to
    annual performance evaluations. Accordingly, you will not have
    the same protections afforded to shareholders of companies that
    are subject to all of the corporate governance requirements of
    the NYSE or Nasdaq.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We will
    have broad discretion in applying the net proceeds of this
    offering and we may not use those proceeds in ways that will
    enhance the market value of our common stock.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our management will retain broad discretion to allocate the net
    proceeds of this offering. The net proceeds may be applied in
    ways with which you and other investors in the offering may not
    agree or which do not increase the value of your investment. We
    intend to use our net proceeds from this offering for general
    corporate purposes, which may include the acquisition of other
    businesses, products or technologies. We have not allocated
    these net proceeds for any specific purposes. Our management may
    not be able to yield a significant return, if any, on any
    investment of these net proceeds. We will not receive any of the
    proceeds from the sale of the shares of our common stock by the
    selling stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">As a
    result of becoming a public company, we will be obligated to
    develop and maintain proper and effective internal control over
    financial reporting and will be subject to other requirements
    that will be burdensome and costly. We may not timely complete
    our analysis of our internal control over financial reporting,
    or these internal controls may not be determined to be
    effective, which could adversely affect investor confidence in
    our company and, as a result, the value of our common
    stock.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have historically operated our business as a private company.
    After this offering, we will be required to file with the
    Securities and Exchange Commission, or SEC, annual and quarterly
    information and other reports that are specified in
    Section&#160;13 of the Securities Exchange Act of 1934, as
    amended, or the Exchange Act. We will also be required to ensure
    that we have the ability to prepare financial statements that
    are fully compliant with all SEC reporting requirements on a
    timely basis. In addition, we will become subject to other
    reporting and corporate governance requirements, including the
    requirements of the NYSE or Nasdaq, and certain provisions of
    the Sarbanes-Oxley Act of 2002 and the regulations promulgated
    thereunder, which will impose significant compliance obligations
    upon us. As a public company, we will be required to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    prepare and distribute periodic public reports and other
    stockholder communications in compliance with our obligations
    under the federal securities laws and the NYSE or Nasdaq rules;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    create or expand the roles and duties of our board of directors
    and committees of the board;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    institute more comprehensive financial reporting and disclosure
    compliance functions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    supplement our internal accounting and auditing function,
    including hiring additional staff with expertise in accounting
    and financial reporting for a public company;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    enhance and formalize closing procedures at the end of our
    accounting periods;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    establish an internal audit function;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    enhance our investor relations function;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    28
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    establish new internal policies, including those relating to
    disclosure controls and procedures; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    involve and retain to a greater degree outside counsel and
    accountants in the activities listed above.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These changes will require a significant commitment of
    additional resources. We may not be successful in implementing
    these requirements and implementing them could adversely affect
    our business or results of operations. In addition, if we fail
    to implement the requirements with respect to our internal
    accounting and audit functions, our ability to report our
    results of operations on a timely and accurate basis could be
    impaired.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    internal control over financial reporting does not currently
    meet the standards required by Section&#160;404 of the
    Sarbanes-Oxley Act, and failure to achieve and maintain
    effective internal control over financial reporting in
    accordance with Section&#160;404 of the Sarbanes-Oxley Act could
    have a material adverse effect on us.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our internal control over financial reporting does not currently
    meet the standards required by Section&#160;404 of the
    Sarbanes-Oxley Act, standards that we will be required to meet
    in the course of preparing our 2010 financial statements. We do
    not currently have comprehensive documentation of our internal
    controls, nor do we document or test our compliance with these
    controls on a periodic basis in accordance with Section&#160;404
    of the Sarbanes-Oxley Act. Furthermore, we have not tested our
    internal controls in accordance with Section&#160;404 and, due
    to our lack of documentation, such a test would not be possible
    to perform at this time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are in the early stages of addressing our internal control
    procedures to satisfy the requirements of Section&#160;404,
    which requires an annual management assessment of the
    effectiveness of our internal control over financial reporting.
    We will incur additional costs in order to improve our internal
    control over financial reporting and comply with
    Section&#160;404, including increased auditing and legal fees
    and costs associated with hiring additional accounting and
    administrative staff. If, as a public company, we are not able
    to implement the requirements of Section&#160;404 in a timely
    manner or with adequate compliance, our independent registered
    public accounting firm may not be able to attest to the
    effectiveness of our internal control over financial reporting.
    If we are unable to maintain adequate internal control over
    financial reporting, we may be unable to report our financial
    information on a timely basis, may suffer adverse regulatory
    consequences or violations of applicable stock exchange listing
    rules and may breach the covenants under our credit facility.
    There could also be a negative reaction in the financial markets
    due to a loss of investor confidence in us and the reliability
    of our financial statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Provisions
    in our certificate of incorporation and bylaws and Delaware law
    may discourage, delay or prevent a change of control of our
    company or changes in our management and, therefore, may depress
    the trading price of our stock.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our certificate of incorporation and bylaws include certain
    provisions that could have the effect of discovering, delaying
    or preventing a change of control of our company or changes in
    our management, including, among other things:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    restrictions on the ability of our stockholders to fill a
    vacancy on the board of directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our ability to issue preferred stock with terms that the board
    of directors may determine, without stockholder approval, which
    could be used to significantly dilute the ownership of a hostile
    acquirer;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the absence of cumulative voting in the election of directors
    which may limit the ability of minority stockholders to elect
    directors; and
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    29
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    advance notice requirements for stockholder proposals and
    nominations, which may discourage or deter a potential acquirer
    from soliciting proxies to elect a particular state of directors
    or otherwise attempting to obtain control of us.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These provisions in our certificate of incorporation and bylaws
    may discourage, delay or prevent a transaction involving a
    change in control of our company that is in the best interest of
    our minority stockholders. Even in the absence of a takeover
    attempt, the existence of these provisions may adversely affect
    the prevailing market price of our common stock if they are
    viewed as discouraging future takeover attempts.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We do not
    expect to pay dividends, and any return on your investment will
    likely be limited to the appreciation of our common
    stock.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently intend to retain our future earnings, if any, for
    the foreseeable future, to repay indebtedness and to fund the
    development and growth of our business. We do not intend to pay
    any dividends to holders of our common stock and the agreements
    governing our credit facility significantly restrict our ability
    to pay dividends. As a result, capital appreciation in the price
    of our common stock, if any, will be your only source of gain or
    income on an investment in our common stock.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    30
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='103'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">FORWARD-LOOKING
    STATEMENTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus contains forward-looking statements that are
    subject to risks and uncertainties. All statements other than
    statements of historical fact included in this prospectus are
    forward-looking statements. Forward-looking statements give our
    current expectations and projections relating to our financial
    condition, results of operations, plans, objectives, future
    performance and business. You can identify forward-looking
    statements by the fact that they do not relate strictly to
    historical or current facts. These statements may include words
    such as &#147;anticipate,&#148; &#147;estimate,&#148;
    &#147;expect,&#148; &#147;project,&#148; &#147;forecast,&#148;
    &#147;plan,&#148; &#147;intend,&#148; &#147;believe,&#148;
    &#147;may,&#148; &#147;should,&#148; &#147;can have,&#148;
    &#147;likely,&#148; &#147;future&#148; and other words and terms
    of similar meaning in connection with any discussion of the
    timing or nature of future operating or financial performance or
    other events.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The forward-looking statements contained in this prospectus are
    based on assumptions that we have made in light of our industry
    experience and on our perceptions of historical trends, current
    conditions, expected future developments and other factors we
    believe are appropriate under the circumstances. As you read and
    consider this prospectus, you should understand that these
    statements are not guarantees of performance or results. They
    involve risks, uncertainties (some of which are beyond our
    control) and assumptions. Although we believe that these
    forward-looking statements are based on reasonable assumptions,
    you should be aware that many factors could affect our actual
    financial results and cause them to differ materially from those
    anticipated in the forward-looking statements. We believe these
    factors include the following risks, among others:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Most of our customers are public schools, which rely on state,
    local and federal funding. If any state, local or federal
    funding is materially reduced, our public school customers may
    no longer be able to afford to purchase our products and
    services;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    If national educational standards and assessments are adopted,
    or if existing metrics for applying state standards are revised,
    new competitors could more easily enter our markets or the
    demands in the markets we currently serve may change;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    If Congress does not reauthorize the Elementary and Secondary
    Education Act, commonly referred to as NCLB since the 2001
    reauthorization, or other legislation does not continue to
    mandate state educational standards and annual assessments,
    demand for our products and services could be materially
    adversely affected;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our recent rapid growth, the recent introduction of a number of
    our products and services and our entry into new markets make it
    difficult for us to evaluate our current and future business
    prospects, and we may be unable to effectively manage our growth
    and new initiatives;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    The recent ongoing adoption of online learning in established
    education markets makes it difficult for us to evaluate our
    current and future business prospects. If web-based education
    fails to achieve widespread acceptance by students, parents,
    teachers, schools and other institutions, our growth and
    profitability may materially suffer;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our service revenue is primarily generated by sales of
    subscriptions to our Study Island products over the term of the
    subscription. Our customer renewal rates for Study Island,
    TeacherWeb and Northstar Learning are difficult to predict and
    declines in our sales of Study Island products or in renewal
    rate may materially adversely affect our business and results of
    operations; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our Study Island products are predominantly purchased by
    individual schools, and any decisions at the district or state
    level to use the products and services of one of our
    competitors, or to limit or reduce the use of web-based
    educational products, could materially adversely affect our
    ability to attract and retain customers.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Should one or more of these risks or uncertainties materialize,
    or should any of these assumptions prove incorrect, our actual
    results may vary in material respects from those projected in
    these forward-looking statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    31
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any forward-looking statement made by us in this prospectus
    speaks only as of the date on which we make it. Factors or
    events that could cause our actual results to differ may emerge
    from time to time, and it is not possible for us to predict all
    of them. We undertake no obligation to update any
    forward-looking statement, whether as a result of new
    information, future developments or otherwise, except as may be
    required by law.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus also contains market data related to our
    business and industry. See &#147;Industry and Market Data.&#148;
    This market data includes projections that are based on a number
    of assumptions. If these assumptions turn out to be incorrect,
    actual results may differ from the projections based on these
    assumptions. As a result, our markets may not grow at the rates
    projected by these data, or at all. The failure of these markets
    to grow at these projected rates may have a material adverse
    effect on our business, financial condition, results of
    operations and the market price of our common stock.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    32
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='104'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROVIDENCE
    EQUITY TRANSACTIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2007, Providence Equity Partners&#160;V, LP and
    affiliated investment funds, or Providence Equity Partners,
    together with Cameron Chalmers and David Muzzo (our founders and
    vice presidents) and MHT-SI, LP, acquired 100% of the voting
    equity interests in Archipelago Learning Holdings, LLC (formerly
    known as Study Island Holdings, LLC), the parent of Archipelago
    Learning, LLC (formerly known as Study Island, LLC), which
    acquired substantially all of the assets of Study Island, LP,
    for $104.8&#160;million, including transaction costs and working
    capital adjustments. In connection with the acquisition:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Providence Equity Partners contributed approximately
    $84.5&#160;million in cash for approximately 77.2% of the voting
    equity interests in Archipelago Learning Holdings, LLC;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Cameron Chalmers and David Muzzo each contributed
    $10.0&#160;million, for a total of $20.0&#160;million, for
    approximately 9.1% each, or a total of approximately 18.2%, of
    the voting equity interests in Archipelago Learning Holdings,
    LLC;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    MHT-SI, LP contributed approximately $5.0&#160;million in cash
    for approximately 4.6% of the voting equity interests in
    Archipelago Learning Holdings, LLC;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    With the cash contributed by Providence Equity Partners, Cameron
    Chalmers, David Muzzo and MHT-SI, LP, (i)&#160;Archipelago
    Learning, LLC purchased substantially all the assets of Study
    Island, LP for $100.0&#160;million, (ii)&#160;Archipelago
    Learning, LLC paid $4.6&#160;million in transaction costs
    related to the acquisition of the assets of Study Island, LP,
    and (iii)&#160;$5.0&#160;million was retained by Archipelago
    Learning, LLC for general corporate purposes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    In November 2007, Archipelago Learning, LLC as borrower, and the
    other persons designated as credit parties from time to time,
    entered into a credit facility providing for a
    $70.0&#160;million term loan and a $10.0&#160;million revolving
    credit facility with General Electric Capital Corporation, as a
    lender and as agent for all lenders, NewStar Financial, Inc., as
    syndication agent, the other parties thereto as lenders and GE
    Capital Markets, Inc. and NewStar Financial, Inc., as joint lead
    arrangers and joint bookrunners; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    With the borrowings under our term loan and cash on hand,
    (i)&#160;Archipelago Learning, LLC paid $1.7&#160;million in
    financing fees related to our credit facility,
    (ii)&#160;Archipelago Learning, LLC distributed
    $74.8&#160;million of its proceeds under its term loan and cash
    on hand to Archipelago Learning Holdings, LLC, and
    (iii)&#160;Archipelago Learning Holdings, LLC made distributions
    of $74.8&#160;million to the holders of its voting equity
    interests.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We refer to the foregoing transactions collectively as the
    &#147;Providence Equity Transactions.&#148;
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    33
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='105'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CORPORATE
    REORGANIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, Archipelago Learning Holdings, LLC and
    its subsidiaries conducted our business. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, the holders of shares of
    Archipelago Learning Holdings, LLC, and certain of their
    affiliates will enter into the following transactions with
    Archipelago Learning, Inc., a newly formed Delaware corporation
    that will act as a holding company for our business:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    The direct or indirect holders of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    of Archipelago Learning Holdings, LLC will, directly or
    indirectly, contribute all such Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    of Archipelago Learning Holdings, LLC held by such parties to
    Archipelago Learning, Inc. in exchange for an aggregate
    of&#160;&#160;&#160;&#160;&#160; shares of common stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our officers, directors and employees who hold vested
    Class&#160;B shares of Archipelago Learning Holdings, LLC will
    contribute their vested Class&#160;B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of&#160;&#160;&#160;&#160;&#160; shares of
    common stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our officers, directors and employees who hold unvested
    Class&#160;B shares of Archipelago Learning Holdings, LLC will
    contribute their unvested Class&#160;B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of&#160;&#160;&#160;&#160;&#160; shares of
    restricted common stock subject to time-based vesting;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our officers, directors and employees (other than our chief
    executive officer, chief financial officer, chief technology
    officer and co-founders) who hold Class&#160;C shares of
    Archipelago Learning Holdings, LLC will contribute such
    Class&#160;C shares to Archipelago Learning, Inc. in exchange
    for an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock and an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    restricted stock unit awards subject to vesting based on, among
    other things, the trading price of our common stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our chief executive officer, chief financial officer, chief
    technology officer and co-founders will contribute their
    Class&#160;C shares of Archipelago Learning Holdings, LLC to
    Archipelago Learning, Inc. in exchange for an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of restricted common stock subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners and an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    restricted stock unit awards subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Providence Equity Partners V-A Study Island L.L.C. and
    Providence Equity
    <FONT style="white-space: nowrap">Partners&#160;V-A</FONT>
    Study Island L.P., which will not have any assets other than
    their direct or indirect interests in Archipelago Learning
    Holdings, LLC, will merge with and into Archipelago Learning,
    Inc.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We refer to the transactions listed above as the &#147;Corporate
    Reorganization.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For a more detailed discussion of the Class&#160;B and
    Class&#160;C shares, the restricted stock and the restricted
    stock unit awards see &#147;Compensation Discussion and
    Analysis&#160;&#151; Elements of Executive
    Compensation&#160;&#151; Equity Compensation Plan.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result of the Corporate Reorganization, Archipelago
    Learning, Inc. will own all of the outstanding member interests
    of Archipelago Learning Holdings, LLC, and Archipelago Learning,
    Inc. will become the parent of Archipelago Learning Holdings,
    LLC and its subsidiaries, and will have no other assets or
    operations. Archipelago Learning, Inc. will be a Delaware
    &#147;C&#148; corporation, and as such will be subject to
    federal and state income taxes. Archipelago Learning Holdings,
    LLC was a limited liability company not subject to state or
    federal income taxes, and as such, the historical financial data
    included in this prospectus do not reflect what our financial
    position and results of operations would have been had we been a
    taxable corporation. We expect to record a net deferred tax
    asset and a corresponding credit to our provision for
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    34
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    income taxes of approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million upon becoming a
    &#147;C&#148; corporation immediately before the effectiveness
    of the registration statement of which this prospectus is a
    part. This deferred tax asset primarily results from the excess
    of the tax basis over the book basis of certain of our
    intangible assets. We expect to realize future reductions in our
    current tax expense as these intangibles are amortized and
    deducted from taxable income on our tax returns. Prior to the
    closing of this offering, Archipelago Learning Holdings, LLC
    intends to make additional cash distributions of approximately
    $1.4&#160;million to the members of Archipelago Learning
    Holdings, LLC to enable them to meet their estimated income tax
    obligations for the period from January&#160;1, 2009 to the date
    of the Corporate Reorganization. The amount of this distribution
    will be based on Archipelago Learning Holdings, LLC&#146;s
    estimated net taxable income from January&#160;1, 2009 to the
    date of the Corporate Reorganization. In addition, the board of
    managers of Archipelago Learning Holdings, LLC has authorized an
    $8.0&#160;million distribution to its members in the third
    quarter of 2009. Purchasers of shares in this offering will not
    receive any of these distributions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Corporate Reorganization will not affect our operations,
    which we will continue to conduct through our operating
    subsidiaries.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The purpose of the Corporate Reorganization is to reorganize our
    corporate structure so that the top-tier entity in our corporate
    structure&#160;- the entity whose common stock is being offered
    to the public in this offering&#160;- is a corporation rather
    than a limited liability company and so that our existing
    investors will own our common stock directly. References in this
    prospectus to our capitalization and other matters pertaining to
    our equity and participation shares prior to the consummation of
    the Corporate Reorganization relate to the capitalization and
    equity and participation shares of Archipelago Learning
    Holdings, LLC. This prospectus includes consolidated financial
    statements and consolidated financial data of Archipelago
    Learning Holdings, LLC. In addition, this prospectus includes an
    audited balance sheet of Archipelago Learning, Inc.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    35
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='106'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    PROCEEDS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We estimate that the net proceeds to us from our sale
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock in this offering will be
    $&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    after deducting underwriting discounts and commissions and
    estimated expenses payable by us in connection with this
    offering. This assumes a public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share, which is the midpoint
    of the price range set forth on the cover of this prospectus. We
    intend to use net proceeds from shares that we sell for general
    corporate purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A $1.00 increase (decrease) in the assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per share
    would increase (decrease) the net proceeds to us from this
    offering by $&#160;&#160;&#160;&#160;&#160;&#160;million,
    assuming the number of shares offered by us, as set forth on the
    cover page of this prospectus, remains the same and after
    deducting underwriting discounts and commissions and estimated
    expenses payable by us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will not receive any proceeds from the sale of shares by the
    selling stockholders, which include entities affiliated with
    members of our board of directors.
</DIV>
<A name='107'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DIVIDEND
    POLICY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC paid aggregate distributions
    to its equity holders of $74.8&#160;million, and
    $0.8&#160;million in the year end December&#160;31, 2007 and the
    six months ended June&#160;30, 2009, respectively. These
    distributions were made in connection with the Providence Equity
    Transactions and to enable equity holders to meet their
    estimated tax obligations. See &#147;Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations.&#148; Archipelago Learning Holdings, LLC has
    authorized an $8.0&#160;million special distribution to its
    equity holders in the third quarter of 2009. In addition,
    Archipelago Learning Holdings, LLC intends to make additional
    distributions of approximately $1.4&#160;million to its equity
    holders to enable them to meet their estimated tax obligations
    for the period from January&#160;1, 2009 to the date of the
    Corporate Reorganization. The amount of this distribution will
    be based on Archipelago Learning Holdings, LLC&#146;s estimated
    net taxable income from January&#160;1, 2009 to the date of the
    Corporate Reorganization. Investors in this offering will not
    receive these distributions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After this offering, we intend to retain all available funds and
    any future earnings to reduce debt and fund the development and
    growth of our business and we do not anticipate paying any
    dividends on our capital stock for the foreseeable future. Our
    ability to pay dividends on our common stock is restricted by
    the terms of our credit facility and may be further restricted
    by any future indebtedness we incur. Our business is conducted
    through our subsidiaries. Dividends from, and cash generated by
    our subsidiaries will be our principal sources of cash to repay
    indebtedness, fund operations and pay dividends. Accordingly,
    our ability to pay dividends to our stockholders is dependent on
    the earnings and distributions of funds from our subsidiaries.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any future determination to pay dividends will be at the
    discretion of our board of directors and will take into account:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    restrictions in our credit facility;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    general economic and business conditions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the financial condition and results of operations of us and our
    subsidiaries;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our capital requirements and the capital requirements of our
    subsidiaries;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the ability of our operating subsidiaries to pay dividends and
    make distributions to us; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    such other factors as our board of directors may deem relevant.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    36
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='108'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our cash and cash equivalents and
    our capitalization as of June&#160;30, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    on an actual basis reflecting the capitalization of Archipelago
    Learning Holdings, LLC; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    on a pro forma as adjusted basis to give effect to:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our Corporate Reorganization as more fully described in
    &#147;Corporate Reorganization;&#148; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the sale
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock in this offering by us at an assumed initial
    public offering price of $&#160;&#160;&#160;&#160;&#160; per
    share (the midpoint of the price range set forth on the cover of
    this prospectus) after deducting underwriting discounts and
    commissions and estimated offering expenses payable by us, and
    the application of the net proceeds from this offering as
    described in &#147;Use of Proceeds.&#148;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This table should be read in conjunction with &#147;Use of
    Proceeds,&#148; &#147;Selected Historical Consolidated Financial
    Data,&#148; &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations&#148; and the
    consolidated financial statements and the related notes thereto
    included elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="76%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of June&#160;30, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pro Forma<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As Adjusted(1)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>(In thousands, except<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Debt:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Current portion of long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Long-term debt, less current portion(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    67,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 40pt">
    Total debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,426
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Members&#146; equity:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;A shares, 109,545,064&#160;shares authorized and
    outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,792
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares,</FONT>
    286,882&#160;shares authorized and outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;B shares, 6,578,727&#160;shares authorized and
    6,028,727&#160;shares outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    855
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;C shares, 7,126,451&#160;shares authorized and
    6,576,451&#160;shares outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Retained Earnings
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,209
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total member&#146;s equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44,949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; equity:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Preferred stock, $0.001&#160;par
    value,&#160;&#160;&#160;&#160;&#160;&#160;shares authorized; no
    shares issued and outstanding, on a pro forma as adjusted basis
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Common stock, $0.001&#160;par
    value,&#160;&#160;&#160;&#160;&#160;&#160;shares
    authorized;&#160;&#160;&#160;&#160;&#160;&#160;shares issued and
    outstanding, on a pro forma as adjusted basis
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Retained income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accumulated other comprehensive income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 40pt">
    Total stockholders&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 50pt">
    Total capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    113,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Assuming the number of shares sold by us in this offering
    remains the same as set forth on the cover page, a $1.00
    increase or decrease in the assumed initial public offering
    price would increase or decrease, as applicable, our total
    capitalization by approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Does not include $10.0&#160;million of our revolving credit
    facility, of which $0 was outstanding at June&#160;30, 2009.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    37
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='109'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DILUTION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you invest in our common stock in this offering, your
    ownership interest will be diluted to the extent of the
    difference between the initial public offering price per share
    and the pro forma as adjusted net tangible book value per share
    of common stock upon the completion of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009, our net tangible book value was
    approximately $&#160;&#160;&#160;&#160;&#160;&#160;million, or
    $&#160;&#160;&#160;&#160;&#160; per share. Our net tangible book
    value represents our total tangible assets less total
    liabilities, divided by the total number of shares of common
    stock outstanding. Dilution in net tangible book value per share
    represents the difference between the amount per share paid by
    purchasers of common stock in this offering and the pro forma
    net tangible book value per share of common stock immediately
    after the consummation of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After giving effect to (i)&#160;the issuance
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our restricted common stock in exchange for outstanding
    Class&#160;A, Class&#160;A-2, Class&#160;B and Class&#160;C
    shares of Archipelago Learning Holdings, LLC in connection with
    the Corporate Reorganization and (ii)&#160;the sale of our
    common stock at an assumed initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share (the midpoint of the
    price range set forth on the cover of this prospectus), and
    after deducting underwriting discounts and commissions and
    estimated offering expenses payable by us, our pro forma as
    adjusted net tangible book value as of June&#160;30, 2009 would
    have been approximately $&#160;&#160;&#160;&#160;&#160;, or
    $&#160;&#160;&#160;&#160;&#160; per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This represents an immediate increase in pro forma net tangible
    book value of $&#160;&#160;&#160;&#160;&#160; per share to our
    existing shareholders and an immediate dilution of
    $&#160;&#160;&#160;&#160;&#160; per share to new investors
    purchasing shares of common stock in this offering at the
    initial public offering price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table illustrates the dilution to new investors on
    a per share basis:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Assumed initial public offering price per share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pro forma net tangible book value per share as of June&#160;30,
    2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Increase in pro forma net tangible book value per share
    attributable to the sale of shares in this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Decrease in pro forma net tangible book value per share
    attributable to the issuance of restricted common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pro forma as adjusted net tangible book value per share after
    this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dilution per share to new investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A $1.00 increase (decrease) in the assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per share (the
    midpoint of the price range set forth on the cover of this
    prospectus) would increase (decrease) our pro forma net tangible
    book value after this offering by
    $&#160;&#160;&#160;&#160;&#160;&#160;million and increase
    (decrease) the dilution to new investors by
    $&#160;&#160;&#160;&#160;&#160; per share, assuming the number
    of shares offered by us, as set forth on the cover page of this
    prospectus remains the same and after deducting the estimated
    underwriting discounts and commissions and estimated offering
    expenses payable by us.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    38
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes, as of June&#160;30, 2009, the
    total number of shares of our common stock we issued and sold,
    the total consideration we received and the average price per
    share paid to us by our existing shareholders and to be paid by
    new investors purchasing shares of our common stock in this
    offering. The table assumes an initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share (the midpoint of the
    price range set forth on the cover of this prospectus) and
    deducts underwriting discounts and commissions and estimated
    offering expenses payable by us:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="48%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Purchased</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total Consideration</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Share</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Existing shareholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    New investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A $1.00 increase (decrease) in the assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per share (the
    midpoint of the price range set forth on the cover of this
    prospectus) would increase (decrease) the total consideration
    paid by new investors by $&#160;&#160;&#160;&#160;&#160; and the
    total consideration paid by all stockholders by
    $&#160;&#160;&#160;&#160;&#160;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we may choose to raise additional capital due to
    market conditions or strategic considerations even if we believe
    we have sufficient funds for our current or future operating
    plans. To the extent that additional capital is raised through
    the sale of equity or convertible debt securities, the issuance
    of such securities could result in further dilution to our
    stockholders.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    39
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='110'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SELECTED
    HISTORICAL CONSOLIDATED FINANCIAL DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the selected historical
    consolidated financial data for Archipelago Learning Holdings,
    LLC for the periods and at the dates indicated. The selected
    historical consolidated financial data as of December&#160;31,
    2008 and December&#160;31, 2007 and the statement of operations
    and other data for each of the years ended December&#160;31,
    2008, 2007 and 2006 are derived from the audited consolidated
    financial statements included elsewhere in this prospectus. The
    selected historical consolidated financial data as of
    June&#160;30, 2009 and for the six months ended June&#160;30,
    2008 and June&#160;30, 2009 have been derived from the unaudited
    consolidated financial statements included elsewhere in this
    prospectus. The interim results set forth below are not
    necessarily indicative of results for the year ending
    December&#160;31, 2009 or for any other period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2007, Providence Equity Partners, together with
    Cameron Chalmers and David Muzzo (our founders and vice
    presidents) and MHT-SI, LP, acquired 100% of the voting equity
    interests in Archipelago Learning Holdings, LLC, the parent of
    Archipelago Learning, LLC, which acquired substantially all of
    the assets of Study Island, LP. See &#147;Providence Equity
    Transactions.&#148; All periods ending prior to January&#160;1,
    2007 are referred to as &#147;Predecessor,&#148; and all periods
    including and after such date are referred to as
    &#147;Successor.&#148; The consolidated financial statements for
    all Successor periods may not be comparable to those of the
    Predecessor period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Contained within the 2007 consolidated financial statements are
    nine calendar days of operations and cash flows of the
    Predecessor. Such amounts are not material to the overall 2007
    consolidated financial statements taken as a whole. Further, the
    consolidated financial position of the Predecessor immediately
    prior to the January&#160;10, 2007, transaction was not
    materially different from that of December&#160;31, 2006.
    Accordingly, we have chosen January&#160;1, 2007, as a date of
    convenience in presenting successor operating results and the
    financial statement information for the period from
    January&#160;1, 2007 through January&#160;9, 2007 has not been
    presented separately.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The selected historical consolidated financial data as of
    December&#160;31, 2004 and December&#160;31, 2005 and for the
    years ended December&#160;31, 2004 and December&#160;31, 2005
    has been omitted. The omitted data is not available and the
    inclusion of such data would require the conversion of cash
    basis financials to financial statements prepared in accordance
    with U.S. generally accepted accounting principles. This
    conversion would require substantial management time and cannot
    be completed without the expenditure of unreasonable effort and
    expense. In addition, as a result of our recent growth and the
    impact of the Providence Equity Transactions, the omitted
    financial data is not comparable to the financial data set forth
    below and, accordingly, we believe the omission of this
    financial data does not have a material impact on the
    understanding of our results of operations, financial
    performance and related trends. The selected historical
    consolidated financial data also does not include financial
    statements of Archipelago Learning, Inc. because it has been
    formed recently for the purpose of effecting the offering and
    until the consummation of the Corporate Reorganization described
    more fully in &#147;Corporate Reorganization,&#148; it will hold
    no material assets and will not engage in any operations. Upon
    completion of the Corporate Reorganization, Archipelago
    Learning, Inc. will become the parent of Archipelago Learning
    Holdings, LLC and its subsidiaries and will have no other assets
    or operations. See &#147;Corporate Reorganization.&#148;
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    40
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The results indicated below and elsewhere in this prospectus are
    not necessarily indicative of our future performance. You should
    read this information together with &#147;Capitalization,&#148;
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; and our consolidated
    financial statements and related notes included elsewhere in
    this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="44%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Six Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>(Unaudited) </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="22" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated Statements of Income:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Service revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,065
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    32,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    21,427
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cost of revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,178
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,782
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,722
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29,890
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,297
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,645
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,793
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,669
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,193
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,195
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Content development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    712
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,162
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    926
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,588
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,644
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,310
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,417
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 40pt">
    Total operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,885
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,999
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,431
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,977
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Income from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,615
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,891
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,866
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,668
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (838
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,161
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,745
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,377
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Interest income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    247
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    160
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Derivative loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (173
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (309
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (141
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (668
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,033
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,894
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,504
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Income before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,947
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    (Provision) benefit for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (23
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (42
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (133
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income per equity share attributable to members&#146; equity
    (Basic and diluted)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.03
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Distributions to Predecessor per equity share attributable to
    members&#146; equity (Basic and diluted)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,177
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    589
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Distributions to Successor per equity share attributable to
    members&#146; equity (Basic and diluted)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    41
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="40%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Six Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>(Unaudited) </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="22" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Balance Sheet Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,318
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    16,931
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    26,922
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    26,468
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,387
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,060
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,144
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,824
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,227
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    127,591
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    142,025
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    130,929
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    144,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,950
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    67,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,762
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    89,244
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101,551
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,463
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    99,463
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total members&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,535
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38,347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,474
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39,466
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44,949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    42
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='111'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT&#146;S
    DISCUSSION AND ANALYSIS OF<BR>
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following discussion and analysis of our financial
    condition and results of operations should be read together with
    &#147;Selected Historical Consolidated Financial Data&#148; and
    the consolidated financial statements and the related notes
    included elsewhere in this prospectus. The historical
    consolidated financial information discussed below reflects the
    historical results of operations of Archipelago Learning
    Holdings, LLC, which will be our wholly owned subsidiary after
    our corporate reorganization, and, except as indicated, the
    discussion below does not give effect to our corporate
    reorganization. See &#147;Corporate Reorganization&#148; for a
    description of our corporate reorganization. This discussion
    contains
    <FONT style="white-space: nowrap">forward-looking</FONT>
    statements, based on current expectations and related to future
    events and our future financial performance, that involve risks
    and uncertainties. Our actual results may differ materially from
    those anticipated in these forward-looking statements as a
    result of many factors, including those set forth under
    &#147;Risk Factors,&#148; &#147;Forward-Looking Statements&#148;
    and elsewhere in this prospectus.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning is a leading subscription-based online
    education company. We provide standards-based instruction,
    practice, assessments and productivity tools that improve the
    performance of educators and students via proprietary web-based
    platforms. Study Island, our core product line, helps students
    in Kindergarten through 12th&#160;grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year, Study Island products were utilized by
    approximately 8.3&#160;million students in over 19,200 schools
    in 50&#160;states who answered over 2.8&#160;billion of our
    practice questions. We recently began offering classroom and
    school website portals, digital lockers and teacher productivity
    tools through our TeacherWeb services and online postsecondary
    programs through our Northstar Learning product line.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were founded in 2000. In 2001, we launched our first Study
    Island products in two states. By 2009, we developed Study
    Island products for all 50&#160;states, expanded our content to
    include the subject areas of reading, writing, mathematics,
    social studies and science and grew from serving 57 schools in
    2001 to more than 19,200 schools. We further expanded our
    product offerings with our June 2008 acquisition of TeacherWeb,
    a website portal and teacher productivity tool that provides
    educators with simple, easy-to-use templates to create district,
    school or classroom websites. We entered the postsecondary
    educational market with the launch of Northstar Learning in
    April 2009, which uses the same web-based platform as our Study
    Island products to provide various instruction, assessment and
    exam preparation content. In addition, in August 2009, we made a
    minority investment in Edline, a private educational technology
    company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We capitalize on two significant trends in the education market:
    (1)&#160;an increased focus on higher academic standards and
    educator accountability for student achievement, which has led
    to periodic assessment in the classroom to gauge student
    learning and inform instruction, also known as formative
    assessment, and (2)&#160;the increased availability and
    utilization of web-based technologies to enhance and supplement
    teacher instruction, engage today&#146;s technology-savvy
    learners and improve student outcomes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2007, investment funds affiliated with Providence
    Equity Partners, together with Cameron Chalmers and David Muzzo
    (our founders and vice presidents) and MHT-SI, LP, acquired 100%
    of the voting equity interests in Archipelago Learning Holdings,
    LLC, the parent of Archipelago Learning, LLC, which subsequently
    acquired substantially all of the assets of Study Island, LP,
    our predecessor. In connection with the acquisition:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Providence Equity Partners contributed approximately
    $84.5&#160;million in cash for approximately 77.2% of the voting
    equity interests in Archipelago Learning Holdings, LLC;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Cameron Chalmers and David Muzzo each contributed
    $10.0&#160;million, for a total of $20.0&#160;million, for
    approximately 9.1% each, or a total of approximately 18.2%, of
    the voting equity interests in Archipelago Learning Holdings,
    LLC;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    43
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 5%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#149;&#160;&#160;&#160;&#160;&#160;MHT-SI, LP contributed
    approximately $5.0&#160;million in cash for approximately 4.6%
    of the voting equity interests in Archipelago Learning Holdings,
    LLC;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    With the cash contributed by Providence Equity Partners, Cameron
    Chalmers, David Muzzo and MHT-SI, LP, (i)&#160;Archipelago
    Learning, LLC purchased substantially all the assets of Study
    Island, LP for $100.0&#160;million, (ii)&#160;Archipelago
    Learning, LLC paid $4.6&#160;million in transaction costs
    related to the acquisition of the assets of Study Island, LP,
    and (iii)&#160;$5.0&#160;million was retained by Archipelago
    Learning, LLC for general corporate purposes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    In November 2007, Archipelago Learning, LLC as borrower, and the
    other persons designated as credit parties from time to time,
    entered into a credit facility providing for a
    $70.0&#160;million term loan and a $10.0&#160;million revolving
    credit facility with General Electric Capital Corporation, as a
    lender and as agent for all lenders, NewStar Financial, Inc., as
    syndication agent, the other parties thereto as lenders and GE
    Capital Markets, Inc. and NewStar Financial, Inc., as joint lead
    arrangers and joint bookrunners; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    With the borrowings under our term loan and cash on hand,
    (i)&#160;Archipelago Learning, LLC paid $1.7&#160;million in
    financing fees related to our credit facility,
    (ii)&#160;Archipelago Learning, LLC distributed
    $74.8&#160;million of its proceeds under its term loan and cash
    on hand to Archipelago Learning Holdings, LLC, and
    (iii)&#160;Archipelago Learning Holdings, LLC made distributions
    of $74.8&#160;million to the holders of its voting equity
    interests.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We refer to the foregoing transactions collectively as the
    &#147;Providence Equity Transactions.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, Archipelago Learning Holdings, LLC and
    its subsidiaries conducted our business. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, the holders of shares of
    Archipelago Learning Holdings, LLC, and certain of their
    affiliates will enter into the following transactions with
    Archipelago Learning, Inc., a newly formed Delaware corporation
    that will act as a holding company for our business:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    The direct or indirect holders of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    of Archipelago Learning Holdings, LLC will, directly or
    indirectly, contribute all such Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    of Archipelago Learning Holdings, LLC held by such parties to
    Archipelago Learning, Inc. in exchange for an aggregate
    of&#160;&#160;&#160;&#160;&#160; shares of common stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our officers, directors and employees who hold vested
    Class&#160;B shares of Archipelago Learning Holdings, LLC will
    contribute their vested Class&#160;B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of&#160;&#160;&#160;&#160;&#160; shares of
    common stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our officers, directors and employees who hold unvested
    Class&#160;B shares of Archipelago Learning Holdings, LLC will
    contribute their unvested Class&#160;B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of&#160;&#160;&#160;&#160;&#160; shares of
    restricted common stock subject to time-based vesting;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our officers, directors and employees (other than our chief
    executive officer, chief financial officer, chief technology
    officer and co-founders) who hold Class&#160;C shares of
    Archipelago Learning Holdings, LLC will contribute such
    Class&#160;C shares to Archipelago Learning, Inc. in exchange
    for an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock and an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;restricted
    stock unit awards subject to vesting based on, among other
    things, the trading price of our common stock;
</TD>
</TR>

</TABLE>

<DIV align="left" style="margin-left: 5%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our chief executive officer, chief financial officer, chief
    technology officer and co-founders will contribute their
    Class&#160;C shares of Archipelago Learning Holdings, LLC to
    Archipelago Learning, Inc. in exchange for an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of restricted common stock subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners and an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    44
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    restricted stock unit awards subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners;&#160;and
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Providence Equity Partners V-A Study Island L.L.C. and
    Providence Equity
    <FONT style="white-space: nowrap">Partners&#160;V-A</FONT>
    Study Island L.P., which will not have any assets other than
    their direct or indirect interests in Archipelago Learning
    Holdings, LLC, will merge with and into Archipelago Learning,
    Inc.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We refer to the transactions listed above as the &#147;Corporate
    Reorganization.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For a more detailed discussion of the Class&#160;B and
    Class&#160;C shares, the restricted stock and the restricted
    unit awards see &#147;Compensation Discussion and
    Analysis&#160;&#151; Elements of Executive
    Compensation&#160;&#151; Equity Compensation Plan.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result of the Corporate Reorganization, Archipelago
    Learning, Inc. will own all of the outstanding member interests
    of Archipelago Learning Holdings, LLC, will become the parent of
    Archipelago Learning Holdings, LLC and its subsidiaries, and
    will have no other assets or operations. Archipelago Learning,
    Inc. will be a Delaware &#147;C&#148; corporation, and as such
    will be subject to federal and state income taxes. Archipelago
    Learning Holdings, LLC was a limited liability company not
    subject to state or federal income taxes, and as such, the
    historical financial data included in this prospectus do not
    reflect what our financial position and results of operations
    would have been had we been a taxable corporation. We expect to
    record a net deferred tax asset and a corresponding credit to
    our provision for income taxes of approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million upon becoming a
    &#147;C&#148; corporation immediately before the effectiveness
    of the registration statement of which this prospectus is a
    part. This deferred tax asset primarily results from the excess
    of the tax basis over the book basis of certain of our
    intangible assets. We expect to realize future reductions in our
    current tax expense as these intangibles are amortized and
    deducted from taxable income on our tax returns. Prior to the
    closing of this offering, Archipelago Learning Holdings, LLC
    intends to make additional cash distributions of approximately
    $1.4&#160;million to the members of Archipelago Learning
    Holdings, LLC to enable them to meet their estimated income tax
    obligations for the period from January&#160;1, 2009 to the date
    of the Corporate Reorganization. The amount of these
    distributions will be based on Archipelago Learning Holdings,
    LLC&#146;s estimated net taxable income from January&#160;1,
    2009 to the date of the Corporate Reorganization. In addition,
    the board of managers of Archipelago Learning Holdings, LLC has
    authorized an $8.0&#160;million distribution to its members in
    the third quarter of 2009. Purchasers of shares in this offering
    will not receive any of these distributions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For more information on the Providence Equity Transactions and
    the Corporate Reorganization, see &#147;Corporate
    Reorganization&#148; and &#147;Certain Relationships and Related
    Person Transactions.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Developments</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In August 2009, in conjunction with Providence Equity
    Partner&#146;s acquisition of Edline Holdings, Inc., or Edline,
    a private Chicago-based educational technology company, we made
    a strategic minority investment in Edline. We purchased 285,601
    Series&#160;A shares of Edline for $2.9&#160;million,
    representing 7.1% of Edline&#146;s outstanding Series&#160;A
    shares. In addition, Edline borrowed $2.1&#160;million from us
    pursuant to a five-year promissory note, which bears interest at
    9.5% per annum and requires semi-annual interest-only payments.
    In connection with these transactions, we received transaction
    fees of $0.2&#160;million. Edline provides online Learning
    Community Management Systems, or LCMS, solutions that help
    schools improve student performance by harnessing the power of
    parental involvement, supporting teachers, and engaging the
    learning community. Services include web hosting, content
    management, information portals, tools for classroom management,
    gradebook, notification, student data analytics, virtual storage
    and related technologies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that we can benefit from strategic opportunities with
    Edline, as Edline is capitalizing on the same trends in the K-12
    education market as Study Island and TeacherWeb: (1)&#160;an
    increased focus on higher academic achievement and
    (2)&#160;increased availability and utilization of web-based
    technologies to enhance and supplement instruction and improve
    school to home communications. Accordingly, there are attractive
    strategic partnership opportunities between Archipelago Learning
    and Edline, including: (1)&#160;linking
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    45
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island&#146;s content to Edline&#146;s school and district
    LCMS solutions; (2)&#160;co-marketing arrangements to capitalize
    on each company&#146;s customer base and sales force; and,
    (3)&#160;linking
    <FONT style="white-space: nowrap">and/or</FONT>
    sharing of web application functionality between Edline and
    TeacherWeb.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Components
    of Service Revenue and Expense</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Service
    Revenue</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Substantially all of our service revenue is generated from
    subscriptions for our products and services. For 2006, 2007,
    2008 and the first six months of 2009, subscription revenue
    accounted for 97.3%, 98.0%, 98.4% and 98.4% of our service
    revenue, respectively. Our subscription revenue is characterized
    as sales to new customers and sales to existing customers. We
    also generate service revenue from individual buys, which are
    individual purchases for access to a product, and from training
    fees, which are fees from customers for onsite or online
    training sessions that are primarily provided to new Study
    Island customers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A significant portion of our service revenue has been and is
    expected to be generated by sales of our Study Island products
    to public schools and school districts, which rely on state,
    federal and local funding. State, federal and local educational
    funding is primarily funded through income or property taxes,
    and such tax revenue may increase or decrease as a result of
    general economic conditions and tax policies. The NCLB
    legislation passed in 2001 conditioned the receipt of federal
    funding for education on the establishment of educational
    standards, annual assessments and the achievement of adequate
    yearly progress milestones. In addition, budget appropriations
    for education at all levels of government are determined through
    the political process, and as a result, the funding that schools
    receive may fluctuate, which may impact our sales to schools in
    future periods.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subscription revenue from our Study Island products accounted
    for 97.7%, 97.8%, 96.8% and 93.1% of our service revenue in
    2006, 2007, 2008 and the first six months of 2009, respectively,
    and we anticipate that service revenue from sales of our Study
    Island products will account for a substantial majority of our
    service revenue for the next few years. We also generate
    subscription revenue from our TeacherWeb service, which account
    for 2.0% and 4.8% of our service revenue in 2008 and the first
    six months of 2009, respectively. We have not yet generated
    significant subscription revenue from our Northstar Learning
    product line, which was launched in April 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pricing for Study Island subscriptions is based on a variety of
    factors. Subscriptions are priced on a fixed price per class or
    a variable price per school based on the number of students per
    grade using the products. In addition, subscriptions are priced
    on a per subject matter basis with discounts given if all of the
    subjects for a given grade are purchased. Subscription prices
    also vary by state based on the number, complexity and
    comprehensiveness of the applicable standards. Our Study Island
    products are specifically built from the varying assessment
    standards in all 50 states, which we believe differentiates us
    from our competitors. If national standards and assessments
    replace current state assessments, we may face increased
    competition as well. The average annual price per student per
    subject is $3.00, or $10.00 per student for all subjects.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our subscription fees are typically billed and paid for in
    advance; however, we recognize subscription revenue ratably over
    the subscription term beginning on the commencement date of each
    subscription. The traditional subscription term is
    12&#160;months for our Study Island products and TeacherWeb
    service and six months for our Northstar Learning product line.
    We occasionally sell multi-year subscriptions. In the case of
    certain sales, a limited number of additional months may be
    offered as a promotional incentive. All of our subscriptions are
    sold on a non-cancelable basis. From time to time, we may
    enhance or upgrade our products. Because we provide our products
    on a single web-based platform, all of our customers generally
    benefit from new features and functionality released during the
    subscription term at no additional cost.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Factors affecting our service revenue include: (i)&#160;the
    number of schools, classes or students purchasing our products;
    (ii)&#160;prices for our products; (iii)&#160;the term of the
    subscriptions; (iv)&#160;subscription renewals; (v)&#160;the
    number of states or geographies in which we offer products;
    (vi)&#160;the number of products we offer in a state or in a
    geographic region; (vii)&#160;the complexity and
    comprehensiveness of applicable standards, which impacts
    pricing; (viii)&#160;the effectiveness of our regional
    field-based and inside sales teams;
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    46
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (ix)&#160;recognition of service revenue in any period from
    deferred revenue from subscriptions purchased or renewed during
    the current and prior periods; (x)&#160;federal, state and local
    educational funding levels; and (xi)&#160;discretionary
    purchasing funds available to our customers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The timing of sales to new Study Island customers, sales to
    existing Study Island customers and TeacherWeb sales is affected
    by seasonal trends associated with school budget years and state
    testing calendars. As a result, most new subscriptions and
    renewals occur in the third quarter because teachers and school
    administrators typically make purchases for the new academic
    year at the beginning of their district&#146;s fiscal year,
    which is usually July&#160;1. The fourth calendar quarter has
    historically produced the second highest level of new
    subscriptions and renewals, followed by the second quarter and
    the first quarter. We anticipate that sales of our Northstar
    Learning products will be highest at the beginning of customary
    academic semesters in September and January. Because our service
    revenue is deferred over the course of the subscription period
    and our customers pay for their subscriptions at the beginning
    of the subscription period, this seasonality does not cause our
    service revenue to fluctuate significantly but does impact our
    cash flow.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009, more than 19,200 schools used Study
    Island products. A school is considered to be using our products
    if it has an active subscription for any or all of the Study
    Island products available to it. The number of schools using our
    products will increase as schools without active subscriptions
    purchase subscriptions for our products. The number of schools
    using our products will decrease if the schools do not renew
    their subscriptions. We generally contact schools several months
    in advance of the expiration of their subscription to attempt to
    secure renewal subscriptions. If a school does not renew its
    subscription within six months after its expiration, we
    categorize it as a lost school and our count of the number of
    schools using our products decreases. If the school subsequently
    purchases a subscription to our products after this renewal
    period, we consider it to be a new subscription. In 2008, we had
    a renewal rate of 77.1%, which reflects the percentage of
    schools that subscribed for our products in one period and then
    subscribed for our products again in the next period, within six
    months of their subscription end date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our subscription purchases are generally evidenced by a purchase
    order. We recognize an invoiced sale in the period in which the
    purchase order is received and the invoice is issued. Service
    revenue for invoiced sales is deferred and recognized ratably
    over the subscription term beginning on the commencement date of
    the applicable subscription.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information regarding our
    invoiced sales as well as other metrics that impact our service
    revenue for the periods presented:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="42%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Six Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Invoiced sales to new customers(1)(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,021
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    11,222
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,099
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,759
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,550
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Invoiced sales to existing customers(1)(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,847
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,709
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,411
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,838
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Invoiced other sales(1)(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    502
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    794
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    557
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    544
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total TeacherWeb sales(5)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,198
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,041
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total invoiced sales(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,504
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25,863
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    42,059
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,727
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,973
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Service revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,065
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,427
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Change in deferred revenue(6)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,439
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,613
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,991
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,727
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (454
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    47
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="38%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>At<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>At December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>At June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Other metrics:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Number of schools using Study Island products(7)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,441
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,214
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Number of students using Study Island products(8)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,311,501
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,380,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,340,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Number of products available(9)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    429
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    650
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    950
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    711
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,186
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Number of states(10)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    We present invoiced sales data to provide a supplemental measure
    of our operating performance. We believe the various invoiced
    sales metrics enable investors to evaluate our sales performance
    in isolation and on a consistent basis without the affects of
    service revenue deferral and service revenue recognition from
    sales in prior periods. In addition, invoiced sales to new
    customers and existing customers and invoiced other sales
    provide investors with important information regarding the
    source of orders for our products and services and our sales
    performance in a particular period. Invoiced sales are not
    recognized under GAAP and should not be used an as indicator of,
    or an alternative to, service revenue and deferred revenue.
    Invoiced sales metrics have significant limitations as
    analytical tools because they do not take into account the
    requirement to provide the applicable product or service over
    the subscription period and they do not match the recognition of
    services revenue with the associated cost of revenue.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Invoiced sales to new customers are recognized in the period in
    which the school or district purchase order is received and the
    invoice is issued. A new customer is any customer that is not
    considered to be an existing customer.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Invoiced sales to existing customers are recognized in the
    period in which the school or district purchase order is
    received and the invoice is issued. An existing customer is
    defined as any customer with an existing subscription to Study
    Island products. We generally contact schools several months in
    advance of the expiration of their subscription to attempt to
    secure renewal subscriptions. If a school does not renew its
    subscription within six months after its expiration, we
    categorize it as a lost school and our count of the number of
    schools using our products decreases. If the school subsequently
    purchases a subscription to our products after this renewal
    period, we consider it to be a new subscription.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    Invoiced other sales include invoices from individual buys,
    which are individual purchases for access to a product, and from
    training fees, which are fees from customers for onsite or
    online training sessions that are primarily provided to new
    Study Island customers.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    TeacherWeb sales are recognized at the point of sale and are not
    evaluated in the same manner as Study Island sales.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (6) </TD>
    <TD></TD>
    <TD valign="bottom">
    Our subscription fees are typically billed and paid for in
    advance. Revenue for invoiced sales is deferred and recognized
    ratably over the subscription term beginning on the commencement
    date of the applicable subscription. The traditional
    subscription term is 12&#160;months for our Study Island
    products and TeacherWeb service and six months for our Northstar
    Learning product line.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (7) </TD>
    <TD></TD>
    <TD valign="bottom">
    A school is considered to be using our products if it has an
    active subscription for any or all of the Study Island products
    available to it.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (8) </TD>
    <TD></TD>
    <TD valign="bottom">
    The numbers of students using Study Island products is the
    number of registered user names. In 2006 and 2007, we did not
    track the number of registered user names and have provided
    calculated management estimates based on the best available data
    for those years.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (9) </TD>
    <TD></TD>
    <TD valign="bottom">
    A Study Island product is any one subject for one grade level in
    a single state. A Northstar Learning product is classified by
    subject.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
     </TD>
    <TD></TD>
    <TD valign="bottom">
</TD>
</TR>

</TABLE>

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    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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    48
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 06 -->

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (10) The number of states is the number of states in which Study
    Island offers products, which are built from the standards of
    such states.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Cost
    of Revenue</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cost of revenue consists of the direct and indirect costs to
    host and make available our products and services to our
    customers. A significant portion of the cost of revenue includes
    salaries, bonuses, stock-based compensation, employee benefits
    costs and taxes related to engineering personnel who maintain
    our servers and technical equipment and who work on our
    web-based hosted platform. The employee benefits costs and taxes
    are allocated based upon a percentage of total compensation
    expense. Other direct and indirect costs include recruiting and
    relocation fees associated with engineering and product
    development employees, contracted labor, facility costs for our
    web platform servers and routers, including backup servers that
    are maintained in colocation facilities in Dallas, Texas,
    depreciation expense on those servers and routers, network
    monitoring costs and amortization of Study Island&#146;s
    technical development intangible asset as a result of the
    Providence Equity Transactions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Operating
    Expense</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We classify our operating expense into three categories: sales
    and marketing, content development, and general and
    administrative. All of the categories include personnel costs.
    Personnel costs for each category of operating expense include
    salaries, bonuses, stock-based compensation, employee benefits
    costs and taxes. Personnel costs for sales and marketing expense
    also include sales commissions. Salary increases are generally
    given in January of each year. Bonuses are expensed monthly as
    they accrue based on management&#146;s estimate of the expected
    bonus amounts, and are actually paid to most employees and sales
    management personnel in July and January. These bonuses are
    based on a combination of business and individual performance
    for the first six months and the last six months of the year.
    Senior management bonuses are generally paid in the first
    quarter of the year, after the results for the prior year are
    known. Sales commissions are generally paid as a percentage of
    sales to new and existing customers, and are paid in the month
    the customer&#146;s purchase order is received.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales and Marketing Expense.</I>&#160;&#160;Our sales and
    marketing expense consists primarily of personnel expense,
    direct marketing costs, travel and entertainment expense, and
    the amortization of customer relationships as an intangible
    asset. Personnel expense has increased significantly since 2005
    as we increased our sales and marketing headcount to
    113&#160;employees at June&#160;30, 2009 from 31&#160;employees
    at December&#160;31, 2006 as a result of the growth in our Study
    Island product line, the TeacherWeb acquisition and the launch
    of our Northstar Learning product line. In addition, our sales
    commissions increased during this period primarily as a result
    of an increased number of sales representatives and higher Study
    Island sales volume. Our employees have also received
    market-driven merit increases in their base salaries during this
    period. Marketing expense consists of direct mail costs, email
    prospecting expense, &#147;pay per click&#148; advertising
    costs, search engine optimization costs, printed material costs,
    marketing research expense, and trade show expense. Marketing
    expense generally increases as our sales efforts increase, both
    in new and existing markets. Our marketing efforts are related
    to the launch of new product offerings, the introduction of our
    products and services in new states and geographic regions, and
    opportunities within a selected market associated with specific
    events (e.g.,&#160;timing for the standardized testing in a
    particular state, upcoming trade shows, etc.).
</DIV>

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    <BR>
    49
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales and marketing expense also includes the amortization of
    customer relationship costs as a result of the Providence Equity
    Transactions and the acquisition of TeacherWeb in June 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Content Development Expense.</I>&#160;&#160;Our content
    development expense primarily consists of personnel costs for
    our content development employees, who are responsible for
    writing the questions for our Study Island and Northstar
    Learning products, and program content amortization expense. Our
    content development personnel costs have increased significantly
    since 2006 as we increased headcount to 46 at June&#160;30, 2009
    from 12 at December&#160;31, 2006 to support the development of
    new Study Island products for each state and the expanded number
    of subjects and grades covered by our Study Island products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative Expense.</I>&#160;&#160;Our
    general and administrative expense includes personnel costs for
    general and administrative employees, accounting and legal
    professional services fees, rent, insurance, travel and
    entertainment expense, and other corporate expense. General and
    administrative expense increased as a result of the expansion of
    our Dallas office space in 2007 and 2008 and the implementation
    of a new financial system and new accounting system 2008 and
    2009. We expect other operating expense to increase in future
    periods as we expect to incur additional expense associated with
    being a public company, including increased personnel costs,
    legal costs, accounting costs, board compensation expense,
    investor relations costs, higher insurance premiums, and costs
    associated with our compliance with Section&#160;404 of the
    Sarbanes-Oxley Act of 2002, other applicable SEC regulations and
    the requirements of the NYSE or Nasdaq.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Income (Expense)</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our other income (expense) includes the interest expense on our
    $70.0&#160;million term loan and $10.0&#160;million revolving
    credit facility entered into in November 2007 and amortization
    of debt financing costs. We borrowed $10.0&#160;million under
    our revolving credit facility in September 2008 and we repaid
    the full amount in November 2008. No amounts were outstanding
    under the revolving credit facility at June&#160;30, 2009. The
    amounts borrowed under our term loan bear interest at rates
    based upon either a base rate or LIBOR, plus an applicable
    margin. We also earn interest income on our cash and cash
    equivalents investments which is included in other income. We
    utilize an interest rate swap, required by the terms of our
    credit facility, as part of our overall risk management
    strategy. We entered into the swap arrangement in December 2007
    with an initial notional amount of $45.5&#160;million. In June
    2009, the notional amount of the interest rate swap decreased to
    $40.5&#160;million and will decrease in periodic amounts to a
    notional amount of $30.5&#160;million at the December&#160;31,
    2010 termination date. We swapped a floating rate payment based
    on the three-month LIBOR for a fixed rate of 4.035% in order to
    minimize the variability in expected future cash flow due to
    interest rate movements on our LIBOR-base variable rate debt. We
    have not designated our interest rate swap as a cash flow hedge.
    The unrealized changes in the derivative fair value are recorded
    as a derivative gain (loss) in other income or expense as well
    as the realized interest income
    <FONT style="white-space: nowrap">and/or</FONT>
    expense associated with the swap.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Income
    Tax Expense</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Income tax expense is comprised of federal, state, local and
    foreign taxes based on our income in the appropriate
    jurisdictions. Prior to the Corporate Reorganization,
    Archipelago Learning Holdings, LLC was treated as a partnership
    and was not a taxpaying entity for federal income tax purposes
    and generally is not a tax paying entity for state income tax
    purposes. As a result, Archipelago Learning Holdings, LLC&#146;s
    income was taxed to its members in their individual federal
    income tax returns. TeacherWeb was and is, treated as a taxable
    corporation for federal income tax purposes. In 2008, we
    recorded a $0.2&#160;million federal and state income tax
    benefit for TeacherWeb. We are also subject to certain franchise
    taxes and we record these expenses in our income tax expense.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Other
    Considerations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Equity Compensation Expense.</I>&#160;&#160;As members of a
    private limited liability company, our members&#146; interests
    consisted of Class&#160;A,
    <FONT style="white-space: nowrap">Class&#160;A-2,</FONT>
    Class&#160;B and Class&#160;C shares. Management and other
    employees were granted Class&#160;B and Class&#160;C shares
    under our 2007 Equity Compensation Plan. For the years ended
    December&#160;31, 2007 and 2008 and for the first six months of
    2009, we recognized approximately $0.6&#160;million,
</DIV>

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    50
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    $0.4&#160;million and $0.2&#160;million, respectively, as
    stock-based compensation expense. Upon completion of this
    offering, these shares will be converted into shares of common
    stock of Archipelago Learning, Inc. See &#147;Corporate
    Reorganization&#148; and &#147;&#151;&#160;Overview.&#148;
    Management&#146;s participation shares will convert into common
    stock, restricted common stock and restricted stock unit awards.
    In addition, in connection with this offering, we intend to
    implement the 2009 Omnibus Incentive Plan. We expect to grant
    additional stock options, restricted stock, restricted stock
    unit awards and other forms of equity-based compensation under
    that plan after the offering, which will result in the
    incurrence of equity compensation expense.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Providence Equity Transactions.</I>&#160;&#160;As a result of
    the Providence Equity Transactions in 2007, our interest expense
    and our depreciation and amortization expense have increased.
    Accordingly, our consolidated financial statements prior to
    January 2007 are not comparable to subsequent period, primarily
    as a result of significantly increased interest expense and
    depreciation and amortization expense.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Corporate Reorganization.</I>&#160;&#160;Immediately prior to
    the consummation of this offering, we will reorganize our
    corporate structure so that the top-tier entity in our corporate
    structure&#160;&#150; the entity whose common stock is being
    offered to the public in this offering&#160;&#150; is a
    corporation rather than a limited liability company. See
    &#147;Corporate Reorganization&#148; and
    &#147;&#151;&#160;Overview.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Critical
    Accounting Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our discussion and analysis of our consolidated financial
    condition and results of operations are based upon our
    consolidated financial statements, which have been prepared in
    accordance with accounting principles generally accepted in the
    United States, or U.S.&#160;GAAP. The preparation of these
    financial statements requires us to make estimates and judgments
    that affect the reported amounts of assets, liabilities, revenue
    and expense, and related disclosure of contingent assets and
    liabilities. On an ongoing basis, we evaluate our estimates
    including those related to long-lived intangible and tangible
    assets, goodwill and stock-based compensation. We base our
    estimates on historical experience and on various other
    assumptions that are believed to be reasonable under the
    circumstances. Actual results may differ from these estimates
    under different assumptions or conditions. All intercompany
    balances and transactions have been eliminated in consolidation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accounting policies we believe to be most critical to
    understanding our results of operations and financial condition
    and that require complex and subjective management judgments are
    discussed below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Revenue Recognition.</I>&#160;&#160;We generate service
    revenue from subscription revenue, which consists of
    subscription fees, training fees, and individual buys, which are
    individual purchases for access to our products. For the six
    months ended June&#160;30, 2008 and 2009, subscription revenue
    accounted for 99.1% and 98.4% of our service revenue,
    respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Service revenue is recognized when all of the following
    conditions are satisfied: there is persuasive evidence of an
    arrangement, the service has been provided to the customer, the
    collection of the fees is reasonably assured, and the amount of
    the fees to be paid by the customer is fixed or determinable.
    Our arrangements do not contain general rights of return.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our subscription fees are typically billed and paid for in
    advance; however, we recognize subscription revenue ratably over
    the subscription term beginning on the commencement date of each
    subscription. We defer the total amount of the sale of
    subscriptions, training, and support as unearned revenue when
    the customer is invoiced and recognize the revenue on a
    straight-line basis over the subscription period. The
    traditional subscription term is 12&#160;months for our Study
    Island products and TeacherWeb service and six months for our
    Northstar Learning products. We occasionally sell multi-year
    subscriptions. In the case of certain sales, a limited number of
    additional months may be offered as a promotional incentive. All
    of our subscriptions are sold on a non-cancelable basis. As a
    result, substantially all of the service revenue that we
    recognize in any period are deferred revenue from subscriptions
    purchased or renewed during current and previous periods. Our
    service revenue from training fees is also recognized ratably
    over the subscription term for the related subscription. From
    time to time, we may enhance or upgrade our products. Because we
    provide
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    our products on a single web-based platform, all of our
    customers generally benefit from new features and functionality
    released during the subscription term at no additional cost.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Training sessions are offered to our customers in conjunction
    with the subscriptions to train the customers on implementing,
    using, and administering the Study Island programs. Training
    revenue is recognized over the life of the subscription.
    Customer support is provided to customers following the sale at
    no additional charge and at a minimal personnel cost per call.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Goodwill, Intangible Assets and Long-Lived
    Assets.</I>&#160;&#160;Goodwill represents the excess of the
    cost of an acquisition over the fair value of net assets
    acquired. In accordance with FASB Statement No.&#160;142,
    <I>Goodwill and Other Intangible Assets</I>, goodwill is
    assessed for impairment at the reporting unit level at least
    annually and any time an event occurs or circumstances change
    that would more likely than not reduce the fair value of the
    goodwill below its carrying value. The goodwill impairment test
    involves a two-step test. The first step is a comparison of each
    reporting unit&#146;s fair value to its carrying value. If the
    carrying value of a reporting unit exceeds its fair value,
    goodwill is considered potentially impaired and we must complete
    the second step of the impairment test. The amount of impairment
    is determined by comparing the implied fair value of reporting
    unit goodwill to the carrying value of the goodwill in the same
    manner as if the reporting unit was being acquired in a business
    combination. Specifically, we would allocate the fair value to
    all of the assets and liabilities of the reporting unit,
    including internally developed intangible assets with a zero
    carrying value, in a hypothetical analysis that would calculate
    the implied fair value of goodwill. If the implied fair value of
    goodwill is less than the recorded goodwill, we would recognize
    an impairment charge for the difference.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Fair value of the reporting units are determined using an income
    approach. The income approach uses a reporting unit&#146;s
    projection of estimated cash flows discounted using a
    weighted-average cost of capital analysis that reflects current
    market conditions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our judgment is a significant factor in determining whether an
    indicator of impairment has occurred. We rely on estimates in
    determining the fair value of each reporting unit, which include
    the following critical quantitative factors:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="2%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Anticipated future cash flows and terminal value for each
    reporting unit.</I>&#160;&#160;The income approach to
    determining the fair value relies on the timing and estimates of
    future cash flows, including an estimate of terminal value. The
    projections use management&#146;s estimates of economic and
    market conditions over the projected period including growth
    rates in service revenue, customer attrition and estimates of
    any expected changes in operating margins. Our projections of
    future cash flows are subject to change as actual results are
    achieved that differ from those anticipated. Because management
    frequently updates its projections, we would expect to identify
    on a timely basis any significant differences between actual
    results and recent estimates. We are not expecting actual
    results to vary significantly from estimates.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Selection of an appropriate discount rate.</I>&#160;&#160;The
    income approach requires the selection of an appropriate
    discount rate, which is based on a weighted-average cost of
    capital analysis. The discount rate is affected by changes in
    short-term interest rates and long-term yield as well as
    variances in the typical capital structure of marketplace
    participants in the security monitoring industry. The discount
    rate is determined based on assumptions that would be used by
    marketplace participants, and for that reason, the capital
    structure of selected marketplace participants is used in the
    weighted-average cost of capital analysis. Given the current
    volatile general economic conditions, it is possible that the
    discount rate will fluctuate in the near term.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We perform our annual impairment tests in the fourth quarter of
    each year. No goodwill impairment under any approach was
    identified in 2007 and 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Intangible assets and other long-lived assets are reviewed for
    impairment when events or changes in circumstances indicate the
    carrying amount may not be recoverable, in accordance with FASB
    Statement No.&#160;144, <I>Accounting for Impairment or Disposal
    of Long-Lived Assets</I>. If impairment indicators exist, the
    amount of impairment recognized is the amount by which the
    carrying value exceeds fair value. An assessment of undiscounted
    future cash flows to be generated by such assets is made. If the
    results of the
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    52
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    analysis indicate impairment, the assets are adjusted to fair
    market value. Long-lived assets are reviewed for impairment when
    events or changes in circumstances indicate the carrying value
    may not be recoverable. Intangible assets with finite lives are
    amortized using the straight-line method over their estimated
    useful lives. No intangible or long-lived assets impairment loss
    was identified in 2006, 2007 and 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock-Based Compensation Expense.</I>&#160;&#160;We have
    adopted FASB Statement No.&#160;123(R), <I>Accounting for
    Stock-Based Compensation</I>. FASB Statement No.&#160;123(R)
    addresses accounting for share-based awards and requires
    companies to record compensation expense for share-based awards
    issued to employees and directors in exchange for services
    provided. The amount of the compensation expense is based on the
    estimated fair value of the awards on their grant dates and is
    recognized over the required service or performance periods of
    the awards.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the first six months of 2009, we granted various members of
    management a total of 673,287 Class&#160;B shares and 673,287
    Class&#160;C shares representing a total grant-date fair value
    of $0.2&#160;million and $40,397, respectively. For the six
    months ended June&#160;30, 2009, $0.2&#160;million was
    recognized as stock-based compensation expense. At June&#160;30,
    2009, the total compensation cost related to unvested
    participation shares not yet recognized was approximately
    $1.0&#160;million, which will be recognized over the remaining
    vesting periods. In 2007 and 2008, we granted to various members
    of management a total of 5,720,692 and 456,336 Class&#160;B
    shares representing a total grant-date fair value of
    $1.8&#160;million and $0.1&#160;million, respectively. In 2007
    and 2008, we also granted to various members of management
    5,720,692 and 456,336 Class&#160;C shares representing total
    grant-date fair value of $0.3&#160;million and $31,944,
    respectively. The grant-date fair value of the Class&#160;B and
    Class&#160;C shares was recognized as stock-based compensation
    over the required service period, which is typically five years
    for Class&#160;B shares. Holders of Class&#160;C shares are
    entitled to distributions after holders of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    receive certain threshold multiples of cash-based returns on
    their respective Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares,</FONT>
    subject to such Class&#160;C share holders&#146; continued
    employment by us. For the years ended December&#160;31, 2007 and
    2008, $0.6&#160;million and $0.4&#160;million, respectively, was
    recognized as stock-based compensation expense. At
    December&#160;31, 2008, the total compensation cost related to
    unvested participation shares not yet recognized was
    approximately $1.0&#160;million, which will be recognized over
    the remaining vesting period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The estimated fair value of the awards was determined by our
    board of managers after taking into account (i)&#160;the nature
    of the business and the history of our business from its
    inception, (ii)&#160;the economic outlook in general and the
    condition and outlook of our industry, (iii)&#160;the book value
    of the stock and financial condition of our business,
    (iv)&#160;our earning capacity, (v)&#160;our dividend-paying
    capacity, (vi)&#160;our goodwill or other intangible value,
    (vii)&#160;prior sales of our equity and the size of the block
    to be valued and (viii)&#160;the market price of stock in
    corporations engaged in similar businesses, whose stock is
    actively traded in a free and open market. We valued the awards
    primarily based on a comparison to similar businesses, business
    ownership interests or securities that have been sold. We
    evaluated pricing multiples derived from transactions of
    companies in the same or a similar line of business and also
    derived from market prices of stocks of companies in the same or
    similar line of business as us. We focused on transactions that
    involved companies engaged in educational services that were
    technology based.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Accounts Receivable.</I>&#160;&#160;We carry our accounts
    receivable at cost, less an allowance for doubtful accounts,
    which is based on management&#146;s assessment of the
    collectability of accounts receivable. We extend unsecured
    credit to our customers in the ordinary course of business, but
    mitigate the associated credit risk by performing ongoing credit
    evaluations of our customers. The vast majority of our customers
    are public schools, which receive their funding from the local,
    state and federal government. We evaluate the adequacy of the
    allowance for doubtful accounts based on a specific customer
    review of the outstanding accounts receivable.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    53
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Results
    of Operations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our consolidated statement of
    income for the periods indicated:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="46%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Six Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June 30,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Consolidated Statements of Income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Service revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,065
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    32,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    21,427
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cost of revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,178
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,782
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,722
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29,890
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,297
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,645
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,793
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,669
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,193
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,195
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Content development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    712
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,162
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    926
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,588
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,644
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,310
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,417
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,885
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,999
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,431
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,977
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Income from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,615
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,891
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,866
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,668
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (838
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,161
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,745
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,377
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Interest income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    247
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    160
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Derivative loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (173
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (309
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (141
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (668
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,033
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,894
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,504
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Income before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,947
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    (Provision) benefit for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (23
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (42
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (133
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
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</TABLE>

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</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Comparison
    of Six Months Ended June&#160;30, 2009 to Six Months Ended
    June&#160;30, 2008</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Service revenue.</I>&#160;&#160;Our service revenue for the
    six months ended June&#160;30, 2009 was $21.4&#160;million,
    representing an increase of $7.4&#160;million, or 53.1%, as
    compared to service revenue of $14.0&#160;million for the six
    months ended June&#160;30, 2008. This increase in service
    revenue reflected the increase in deferred revenue from
    subscriptions purchased or renewed during current and previous
    periods. For a description of metrics affecting our service
    revenue, including invoiced sales and deferred revenue, see
    &#147;&#151;&#160;Components of Service Revenue and
    Expense&#160;&#151; Service Revenue.&#148; We implemented an
    average price increase for our Study Island products of 6.5% in
    August 2008, which was reflected in our service revenue for the
    six months ended June&#160;30, 2009. The acquisition of
    TeacherWeb in June 2008 contributed an additional
    $1.2&#160;million of service revenue during the six months ended
    June&#160;30, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of revenue.</I>&#160;&#160;Cost of revenue for the six
    months ended June&#160;30, 2009 increased by $1.1&#160;million,
    or 153.5%, to $1.8&#160;million from $0.7&#160;million for the
    six months ended June&#160;30, 2008. This increase in cost of
    revenue was primarily attributable to a $0.9&#160;million
    increase in engineering personnel costs resulting from the
    increased headcount resulting in part from the acquisition of
    TeacherWeb. Our total engineering headcount increased from 11 at
    June&#160;30, 2008 to 25 at June&#160;30, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales and Marketing Expense.</I>&#160;&#160;Sales and
    marketing expense for the six months ended June&#160;30, 2009
    increased by $0.8&#160;million, or 12.5%, to $7.0&#160;million
    from $6.2&#160;million for the six months ended June&#160;30,
    2008. This increase was primarily attributable to a
    $0.4&#160;million increase in personnel costs resulting in part
</DIV>

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    <BR>
    54
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    from the acquisition of TeacherWeb, a $0.1&#160;million increase
    in related marketing expense and $0.2&#160;million in
    amortization expense related to TeacherWeb&#146;s customer
    relationship amortization.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Content Development Expense.</I>&#160;&#160;Content
    development expense for the six months ended June&#160;30, 2009
    increased by $0.7&#160;million, or 71.5%, to $1.6&#160;million
    from $0.9&#160;million for the six months ended June&#160;30,
    2008. This increase was primarily attributable to a
    $0.6&#160;million increase in personnel costs related to the
    completion of the development of Study Island products for all
    50&#160;states and the development of content for our Northstar
    Learning product line. Headcount for content development
    increased to 46&#160;employees at June&#160;30, 2009 from
    38&#160;employees at June&#160;30, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative Expense.</I>&#160;&#160;General
    and administrative expense for the six months ended
    June&#160;30, 2009 increased by $2.1&#160;million, or 91.2%, to
    $4.4&#160;million from $2.3&#160;million for the six months
    ended June&#160;30, 2008. This increase was primarily
    attributable to a $1.1&#160;million increase in personnel costs,
    $0.2&#160;million in costs related to investigating potential
    acquisitions, $0.1&#160;million related to increased accounting
    fees associated with our audit of 2008, 2007 and 2006 in
    preparation for this offering, a $0.1&#160;million increase in
    rent associated with our increased office space,
    $0.1&#160;million related to increased telephone and internet
    expense to support additional employees, and increased
    depreciation expense of $0.3&#160;million associated with our
    capital expenditures.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Income (Expense).</I>&#160;&#160;Interest income for
    the six months ended June&#160;30, 2009 decreased by
    $0.1&#160;million, or 91.3%, to $14,000 from $0.2&#160;million
    for the six months ended June&#160;30, 2008. This decrease was
    primarily due to the lower interest earnings rates on higher
    average cash balances maintained during the first six months of
    2009 as compared to the first six months of 2008. Interest
    expense for the six months ended June&#160;30, 2009 was
    $1.4&#160;million, representing a decrease of $1.4&#160;million,
    or 49.8%, as compared to $2.7&#160;million for the six months
    ended June&#160;30, 2008. This lower interest expense was
    primarily due to a combination of reduced debt levels, lower
    LIBOR levels and reduced applicable margin under our term loan
    as a result of our reduced leverage ratio during the applicable
    period. The loss on our interest rate swap for the six months
    ended June&#160;30, 2009 was $0.1&#160;million, representing a
    decrease of $0.2&#160;million, or 54.4%, as compared to the loss
    of $0.3&#160;million for the six months ended June&#160;30,
    2008. This was due to the less volatile changes in the fair
    value of the derivative as recorded in the consolidated
    statements of income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net Income.</I>&#160;&#160;Net income for the six months
    ended June&#160;30, 2009 increased by $4.1&#160;million, or
    441.0%, to $5.0&#160;million from $0.9&#160;million for the six
    months ended June&#160;30, 2008. This increase in net income was
    due to the $7.4&#160;million increase in the service revenue
    that we recognized in the six months ended June&#160;30, 2009
    from deferred revenue from subscriptions purchased or renewed
    during current and previous periods. This increase was partially
    offset by the $1.1&#160;million increase in cost of revenue and
    $3.5&#160;million increase in operating expense as noted above.
    Net income for this period also increased due to the lower
    interest expense incurred under our credit facility due to the
    combination of reduced debt levels, lower LIBOR levels and the
    reduced applicable margin under our term loan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Comparison
    of Years Ended December&#160;31, 2008 and December&#160;31,
    2007</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Service revenue.</I>&#160;&#160;Service revenue for the year
    ended December&#160;31, 2008 increased by $13.8&#160;million, or
    75.7%, to $32.1&#160;million from $18.3&#160;million for the
    year ended December&#160;31, 2007. This increase in revenue was
    primarily attributable to the increase in the service revenue
    that we recognized for the year ended December&#160;31, 2008
    from deferred revenue from subscriptions purchased or renewed
    during current and previous periods. For a description of
    certain metrics affecting our service revenue, including
    invoiced sales and deferred revenue, see
    &#147;&#151;&#160;Components of Service Revenue and
    Expense&#160;&#151; Service Revenue.&#148; The increase in
    service revenue in 2008 was impacted by the release of
    additional Study Island products during 2007 and 2008. We
    implemented an average price increase for our Study Island
    products of 6.5% in August 2008. The acquisition of TeacherWeb
    in June 2008 contributed an additional $0.7&#160;million in
    service revenue for the year ended December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of revenue.</I>&#160;&#160;Cost of revenue for the year
    ended December&#160;31, 2008 increased by $1.4&#160;million, or
    190.4%, to $2.2&#160;million from $0.8&#160;million for the year
    ended December&#160;31, 2007. This increase in cost of revenue
    was primarily attributable to a $0.9&#160;million increase in
    personnel costs resulting from an increase in
</DIV>

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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    engineering headcount from 9 at December&#160;31, 2007 to 23 at
    December&#160;31, 2008. In addition, we incurred
    $0.3&#160;million of expense attributable to the acquisition of
    TeacherWeb and $0.3&#160;million of expense related to
    facilities, network security, recruiting and depreciation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales and Marketing Expense.</I>&#160;&#160;Sales and
    marketing expense for the year ended December&#160;31, 2008
    increased by $5.5&#160;million, or 72.0%, to $13.2&#160;million
    from $7.7&#160;million for the year ended December&#160;31,
    2007. This increase was primarily attributable to
    $4.4&#160;million in increased personnel costs related to the
    expansion of the Study Island sales team, $0.4&#160;million of
    marketing expense related to new product releases,
    $0.3&#160;million for additional contract labor and a
    $0.2&#160;million increase in customer relationship amortization
    resulting from our acquisition of TeacherWeb in June 2008.
    Headcount for sales and marketing increased to
    114&#160;employees at December&#160;31, 2008 from
    88&#160;employees at December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Content Development Expense.</I>&#160;&#160;Content
    development expense for the year ended December&#160;31, 2008
    increased by $1.0&#160;million, or 79.3%, to $2.2&#160;million
    from $1.2&#160;million for the year ended December&#160;31,
    2007. This increase was primarily attributable to a
    $0.9&#160;million increase in personnel costs. Headcount for
    content development increased to 44&#160;employees at
    December&#160;31, 2008 from 20 at December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative Expense.</I>&#160;&#160;General
    and administrative expense for the year ended December&#160;31,
    2008 increased by $1.6&#160;million, or 32.6%, to
    $6.6&#160;million from $5.0&#160;million for the year ended
    December&#160;31, 2007. This increase was primarily attributable
    to accounting expense and subscription fees to an online service
    associated with the implementation of a new financial system in
    January 2008, increased bank fees associated with our term loan
    and revolving credit facility, increased expense associated with
    mergers and acquisition activities, and increased rent expense
    due to our leasing additional office space in Dallas to support
    additional Dallas-based employees. Depreciation expense
    increased by $0.2&#160;million from the year ended
    December&#160;31, 2007 as compared to the year ended
    December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Income (Expense).</I>&#160;&#160;Interest income for
    the year ended December&#160;31, 2008 decreased by
    $0.1&#160;million, or 28.0%, to $0.2&#160;million from
    $0.3&#160;million for the year ended December&#160;31, 2007.
    This decrease was due to higher average cash balances during
    2008 offset by lower prevailing interest rates during 2008.
    Interest expense for the year ended December&#160;31, 2008 was
    $5.2&#160;million, representing an increase of $4.3&#160;million
    as compared to interest expense of $0.8&#160;million for the
    year ended December&#160;31, 2007. This higher interest expense
    was due to the full year effect of borrowings under the term
    loan that we entered into in November 2007. Other expense also
    increased for the year ended December&#160;31, 2008 as compared
    to the year ended December&#160;31, 2007, due to the derivative
    loss of $2.1&#160;million in the year ended December&#160;31,
    2008, which reflects an increase of $1.9&#160;million over as
    compared to a $0.2&#160;million loss for the prior year. This
    loss was due to the fair value changes for our interest rate
    swap recorded in our statements of income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net income.</I>&#160;&#160;Net income decreased by
    $1.9&#160;million, or 65.0%, to $1.0&#160;million from
    $2.9&#160;million for the year ended December&#160;31, 2007.
    This decrease in net income was due to a $1.4&#160;million
    increase in cost of revenue and an $8.1&#160;million increase in
    operating expense as discussed above, an $4.3&#160;million
    increase in interest expense associated with the full year
    effect of borrowings under the term loan we entered into in
    November 2007 and an increase in derivative losses of
    $1.9&#160;million due to the fair value changes for our interest
    rate swap, which were offset in part by the $13.8&#160;million
    increase in service revenue for the year ended December&#160;31,
    2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Comparison
    of Years Ended December&#160;31, 2007 and December&#160;31,
    2006</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Service revenue.</I>&#160;&#160;Service revenue for the year
    ended December&#160;31, 2007 increased by $8.2&#160;million, or
    81.3%, to $18.3&#160;million from $10.1&#160;million for the
    year ended December&#160;31, 2006. This increase was primarily
    attributable to the increase in the service revenue that we
    recognized for the year ended December&#160;31, 2007 from
    deferred revenue from subscriptions purchased or renewed during
    current and previous periods as compared to the service revenue
    recognized for the year ended December&#160;31, 2006. For a
    description of certain metrics affecting our service revenue,
    including invoiced sales and deferred revenue, see
    &#147;&#151;&#160;Components of Service Revenue and
    Expense&#160;&#151; Service Revenue.&#148; We implemented an
    average price increase for our Study Island products of
    approximately 12% in August 2007.
</DIV>

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    <BR>
    56
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of revenue.</I>&#160;&#160;Cost of revenue for the year
    ended December&#160;31, 2007 increased by $0.4&#160;million, or
    118.7%, to $0.8&#160;million from $0.3&#160;million for the year
    ended December&#160;31, 2006. This increase in cost of revenue
    was primarily attributable to an increase in engineering
    personnel costs.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales and Marketing Expense.</I>&#160;&#160;Sales and
    marketing expense for the year ended December&#160;31, 2007
    increased by $4.9&#160;million, or 174.6%, to $7.7&#160;million
    from $2.8&#160;million for the year ended December&#160;31,
    2006. This increase was primarily attributable to a
    $2.7&#160;million increase in personnel expense related to
    expanding the Study Island sales team, a $0.5&#160;million
    increase in marketing expense related to increased product
    releases and a $0.3&#160;million increase in expense related to
    contract labor. Headcount for sales and marketing increased to
    88&#160;employees at December&#160;31, 2007 from
    31&#160;employees at December&#160;31, 2006. Amortization cost
    specifically related to customer relationships increased by
    $1.3&#160;million in connection with the Providence Equity
    Transactions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Content Development Expense.</I>&#160;&#160;Content
    development expense for the year ended December&#160;31, 2007
    increased by $0.5&#160;million, or 69.4%, to $1.2&#160;million
    from $0.7&#160;million for the year ended December&#160;31,
    2007. This increase is primarily attributable to a
    $0.4&#160;million increase in personnel expense. In addition,
    $0.2&#160;million is attributable to increased amortization of
    our content intangible asset related to the purchase of Study
    Island, LP in January 2007 in connection with the Providence
    Equity Transactions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative Expense.</I>&#160;&#160;General
    and administrative expense for the year ended December&#160;31,
    2007 increased by $2.4&#160;million, or 94.1%, to
    $5.0&#160;million from $2.6&#160;million for the year ended
    December&#160;31, 2006. This increase was primarily attributable
    to a $1.3&#160;million increase in personnel expense related to
    headcount which included hiring of our chief executive officer
    and chief financial officer and costs associated with bonus
    payments made to such personnel in connection with the
    Providence Equity Transactions, $0.2&#160;million increase in
    rent expense due to the expansion of our Dallas office and
    additional increases related to increased telephone and internet
    expense to support additional employees, increased accounting
    expense in connection with entry into our term loan and
    revolving credit facility, and the implementation of a new
    financial system.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other income (expense).</I>&#160;&#160;Interest income for
    the year ended December&#160;31, 2007 increased by
    $0.3&#160;million, or 1170.4%, to $0.3&#160;million from $27,000
    for the year ended December&#160;31, 2006. This increase was due
    to maintaining higher average cash balances in 2007 as compared
    to 2006. Interest expense for the year ended December&#160;31,
    2007 was $0.8&#160;million. We did not incur interest expense in
    2006. This higher interest expense was due to borrowings under
    our term loan that we entered into in November 2007. We incurred
    $0.2&#160;million of derivative losses in 2007 due to the fair
    value changes for the interest rate swap that we entered into in
    November 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net income.</I>&#160;&#160;Net income for the year ended
    December&#160;31, 2007 decreased by $0.7&#160;million, or 20.2%,
    to $2.9&#160;million from $3.7&#160;million for the year ended
    December&#160;31, 2006. This decrease in net income was due to a
    $0.4&#160;million increase in cost of revenue, a
    $7.8&#160;million increase in operating expense as noted above,
    a $0.8&#160;million increase in interest expense associated with
    the borrowings under our term loan, $0.2&#160;million in
    derivative losses, which were offset in part by the
    $8.2&#160;million increase in service revenue and interest
    income of $0.3&#160;million for the year ended December&#160;31,
    2007.
</DIV>

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    <BR>
    57
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Quarterly
    Information</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables set forth selected unaudited quarterly
    consolidated statements of income data for the six most recent
    quarters. The information for each of these quarters has been
    prepared on the same basis as the audited consolidated financial
    statements included in this prospectus and, in the opinion of
    management, includes all adjustments necessary for the fair
    presentation of the results of operations for such periods. This
    data should be read in conjunction with the audited consolidated
    financial statements and the related notes included in this
    prospectus. These quarterly operating results are not
    necessarily indicative of our operating results for any future
    period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="36%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="22" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Three Months Ended</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>March&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>June&#160;30,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>September&#160;30,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>March&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>June&#160;30,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="22" align="center" valign="bottom">
    <B>(In thousands, except share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Service revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,844
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,156
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,319
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,749
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,539
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,888
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    312
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    391
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    550
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    925
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    919
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    863
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,532
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,769
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,824
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,620
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,025
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,356
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,839
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,321
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,677
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,304
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,668
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Content development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    425
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    501
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    570
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    836
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    752
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    896
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,414
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,322
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,012
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,094
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,323
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,677
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,754
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,213
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,355
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,234
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,743
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,855
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,011
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,556
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,469
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,282
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,556
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,189
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,228
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,188
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (740
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (637
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    90
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    53
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Derivative gain (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,305
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    996
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (548
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,262
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (60
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (81
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,771
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (123
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,742
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,397
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (792
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (712
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (916
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,888
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (186
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    72
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,594
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,570
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    (Provision) Benefit for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (21
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (21
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    53
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    153
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (58
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (75
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net (loss) income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (937
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,867
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (133
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,536
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,495
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss) per equity share attributable to members&#146;
    equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic and diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.01
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Weighted average equity shares and equivalents outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic and diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Liquidity
    and Capital Resources</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our primary cash requirements include the payment of our
    operating expense, interest and principal payments on our debt,
    and capital expenditures. We also have used cash to make
    dividend payments and tax-related distributions to our equity
    holders. We finance our operations primarily through cash flow
    from operations, which is typically the highest in the third and
    fourth quarters when sales of our Study Island and TeacherWeb
    products are highest and invoices are paid. Our cash flow from
    operations is typically flat in the first and second quarters.
    In November 2007, we entered into a six-year $70.0&#160;million
    term loan and into a $10.0&#160;million revolving credit
    facility. We used the proceeds of the term loan and cash on hand
    to make a make a dividend payment to the equity holders of
    Archipelago Learning Holdings, LLC in November 2007. We repaid
    $0.9&#160;million in principal on our term loan during the six
    months ended June&#160;30, 2009. We repaid
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    58
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    $0.7&#160;million in principal on our term loan during the year
    ended December&#160;31, 2008. We did not repay any principal on
    our term loan in 2007. See &#147;&#151;&#160;Overview&#148;
    above and &#147;&#151;&#160;Credit Facility&#148; below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our primary sources of liquidity are our cash and cash
    equivalent balances as well as availability under our revolving
    credit facility. At December&#160;31, 2008, we had cash and cash
    equivalents of $13.1&#160;million and $10.0&#160;million of
    availability under our revolving credit facility. Our total
    indebtedness was $69.3&#160;million at December&#160;31, 2008.
    At June&#160;30, 2009, our principal sources of liquidity were
    cash and cash equivalents of $15.9&#160;million and
    $10.0&#160;million of availability under our revolving credit
    facility. Our total indebtedness was $68.4&#160;million at
    June&#160;30, 2009. We believe that our consistent cash flow and
    our $10.0&#160;million availability combined with our low
    capital expenditure costs will provide us with sufficient
    capital to continue to grow our business, but we will use a
    significant portion of our cash flow to pay interest on our
    outstanding debt, limiting the amount available for working
    capital, capital expenditures and other general corporate
    purposes. As we continue to expand our business, we may in the
    future require additional working capital for increased costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Long-term
    Liquidity</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2008, we had cash and cash equivalents of
    $13.1&#160;million and $10.0&#160;million of availability under
    our revolving credit facility, and at June&#160;30, 2009, we had
    cash and cash equivalents of $15.9&#160;million and
    $10.0&#160;million of availability under our revolving credit
    facility. We anticipate that the funds generated by our
    operations, as well as funds available under our revolving
    credit facility, as well as the net proceeds that we receive
    from this offering, will be sufficient to meet working capital
    requirements and to finance capital expenditures over the next
    several years. There can be no assurance, however, that
    sufficient cash resources will be available to us in an amount
    sufficient to enable us to service our indebtedness or to fund
    our other liquidity needs. Our ability to meet our debt service
    obligations and other capital requirements, including capital
    expenditures and acquisitions, will depend upon our future
    results of operations and our ability to obtain additional debt
    or equity capital and our ability to stay in compliance with our
    financial covenants, which, in turn, will be subject to general
    economic, financial, business, competitive, legislative,
    regulatory and other conditions, many of which are beyond our
    control. We may also need to obtain additional funds to finance
    acquisitions, which may be in the form of additional debt or
    equity. Although we believe we have sufficient liquidity under
    our revolving credit facility, as discussed above, under extreme
    market conditions there can be no assurance that such funds
    would be available or sufficient, and in such a case, we may not
    be able to successfully obtain additional financing on favorable
    terms, or at all.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Cash
    Flow</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cash Flow
    from Operating Activities</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by operating activities was $4.8&#160;million
    during the six months ended June&#160;30, 2009 compared to
    $2.8&#160;million during the six months ended June&#160;30,
    2008. This $2.0&#160;million increase was primarily due to an
    increase in net income of $4.1&#160;million offset by a decrease
    in cash flows from working capital of $2.3&#160;million. The
    decrease in working capital was primarily the result of a change
    in deferred revenues.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by operating activities was $13.6&#160;million
    for 2008 compared to $12.7&#160;million in 2007. The
    $0.9&#160;million increase was primarily due to changes in
    non-cash adjustments totaling $1.7&#160;million and working
    capital improvements of $1.0&#160;million partially offset by a
    decrease in net income of $1.9&#160;million, The working capital
    improvements were primarily the result of a $2.2&#160;million
    increase in deferred revenue, offset by a $1.3&#160;million
    decrease in accrued liabilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by operating activities was $12.7&#160;million
    for 2007 compared with $7.5&#160;million in 2006. The
    $5.2&#160;million increase was primarily due to changes in
    non-cash adjustments totaling $2.5&#160;million and working
    capital improvements of $3.5&#160;million partially offset by a
    decrease in net income of $0.7&#160;million. The increase in
    working capital was primarily due to an increase in deferred
    revenue of $3.2&#160;million, an increase in accrued liabilities
    of $1.1&#160;million, offset by a decrease in accounts
    receivable of $0.4&#160;million and a decrease in prepaid
    expenses and other expenses of $0.5&#160;million.
</DIV>

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    <BR>
    59
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cash Flow
    from Investing Activities</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used for investing activities for the six months ended
    June&#160;30, 2009 was $0.4&#160;million used for the purchase
    of property and equipment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used for investing activities for the year ended
    December&#160;31, 2008 was $11.0&#160;million and included
    $9.7&#160;million in net cash used for the purchase of
    TeacherWeb and $1.3&#160;million used for the purchase of
    property and equipment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used for investing activities in 2007 was
    $85.3&#160;million and included $84.8&#160;million net cash used
    for the purchase of Study Island, LP in connection with the
    Providence Equity Transactions and $0.5&#160;million used for
    the purchase of property and equipment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used for investing activities in 2006 was
    $0.2&#160;million and included the purchase of property and
    equipment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cash Flow
    from Financing Activities</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used for financing activities in the six months ended
    June&#160;30, 2009 was $1.6&#160;million due to
    $0.9&#160;million in principal payments on our term loan and
    $0.8&#160;million in tax distributions paid to our members.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used for financing activities was $0.5&#160;million for
    2008 and was primarily due to $10.0&#160;million of payments on
    our revolving credit facility and $0.7&#160;million of payments
    on our term loan, offset in part by the receipt of
    $10.0&#160;million in proceeds from our revolving credit
    facility and $0.2&#160;million in refunds for debt financing
    costs incurred in the year ended December&#160;31, 2007 in
    connection with the Providence Equity Transactions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by financing activities for 2007 was
    $82.2&#160;million and was primarily due to the receipt of
    $89.5&#160;million in proceeds from the issuance of equity and
    the receipt of $70.0&#160;million in proceeds from the
    incurrence of debt under our term loan in connection with the
    Providence Equity Transactions. These proceeds were offset in
    part by $74.8&#160;million in distributions to our
    equityholders, $1.7&#160;million in debt financing costs and
    $0.8&#160;million in cash distributions to the predecessor
    owners.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used for financing activities was $6.4&#160;million for
    2006 due to the $6.4&#160;million of cash distributions made to
    the predecessor owners.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC has authorized an
    $8.0&#160;million special distribution in the third quarter of
    2009. In addition, Archipelago Learning Holdings, LLC intends to
    make additional distributions of approximately $1.4&#160;million
    to its equity holders to enable them to meet their estimated tax
    obligations for the period from January&#160;1, 2009 to the date
    of the Corporate Reorganization. The amount of these
    distributions will be based on Archipelago Learning Holdings,
    LLC&#146;s estimated net taxable income from January&#160;1,
    2009 to the date of the Corporate Reorganization.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Credit
    Facility</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In November 2007, as part of the Providence Equity Transactions,
    we entered into an $80.0&#160;million credit facility with
    General Electric Capital Corporation, as agent, composed of a
    $70.0&#160;million term loan and a $10.0&#160;million revolving
    credit facility commitment of $10.0&#160;million, which expires
    in November 2013. The proceeds of the term loan and
    $4.9&#160;million in cash were used to pay a distribution of
    $73.2&#160;million to the Class&#160;A shareholders and debt
    financing costs of $1.7&#160;million. The term loan bears
    interest at rates based upon either a base rate or LIBOR rate
    plus an applicable margin (3.25% as of June&#160;30, 2009, 3.25%
    as of December&#160;31, 2008, and 4.00% as of December&#160;31,
    2007, respectively, in each case for a LIBOR-based term loan)
    determined based on our leverage ratio. Amounts under the
    revolving credit facility can be borrowed and repaid, from time
    to time, at our option, subject to the pro forma compliance with
    certain financial covenants. In 2008, we received a refund of a
    portion of our debt financing costs in the amount of
    $0.2&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009 the credit agreement governing the term loan and the
    revolving credit facility was amended to permit the creation of
    AL Midco, LLC, or AL Midco, a new wholly owned subsidiary of
</DIV>

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    <BR>
    60
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC, which assumed all of
    Archipelago Learning Holdings, LLC&#146;s interests in
    Archipelago Learning, LLC. AL Midco, became a guarantor under
    the credit agreement and Archipelago Learning Holdings, LLC was
    released as guarantor.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The obligations under the credit facility are guaranteed by AL
    Midco and TeacherWeb. The credit facility is secured on a
    first-priority basis by security interests (subject to permitted
    liens) in substantially all tangible and intangible assets,
    subject to certain exceptions, owned by Archipelago Learning,
    LLC, AL Midco and TeacherWeb, including pledges of the voting
    stock of the subsidiaries of Archipelago Learning, LLC,
    AL&#160;Midco and TeacherWeb. In addition, any future domestic
    subsidiaries of Archipelago Learning, LLC, AL&#160;Midco and
    TeacherWeb will be required (subject to certain exceptions) to
    guarantee the credit facility and grant liens on substantially
    all of its assets to secure such guarantee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our credit facility requires us to maintain certain financial
    ratios, including a leverage ratio (based on the ratio of
    consolidated indebtedness, net of cash and cash equivalents
    subject to control agreements, to consolidated EBITDA, defined
    in the credit facility as earnings before interest, taxes,
    depreciation, derivative losses, changes in deferred revenue,
    stock based compensation, certain investments and permitted
    acquisition expenses, certain permitted payments to Providence
    Equity Partners, unusual non-recurring charges, certain agency
    fees to the administrative agent and adjustments related to the
    acquisition of TeacherWeb, or Adjusted EBITDA), an interest
    coverage ratio (based on the ratio of Adjusted EBITDA to
    consolidated interest expense, as defined in the credit
    facility) and a fixed charge coverage ratio (based on the ratio
    of Adjusted EBITDA to fixed charges, as defined in the credit
    facility). Based on the formulations set forth in the credit
    facility, as of June&#160;30, 2009, we were required to maintain
    a maximum leverage ratio of 4.50 to 1.00, a minimum interest
    coverage ratio of 2.10 to 1.00 and a minimum fixed charge
    coverage ratio of 1.40 to 1.00. As of June&#160;30, 2009, our
    leverage ratio was 2.61 to 1.00, our interest coverage ratio was
    5.45 to 1.00 and our fixed charge coverage ratio was 3.65 to
    1.00. The financial ratios we are required to maintain become
    more restrictive over time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our credit facility also contains certain affirmative and
    restrictive covenants that, among other things, provide
    limitations on the incurrence of additional indebtedness, liens
    on property, sale and leaseback transactions, investments, loans
    and advances, merger or consolidation, asset sales,
    acquisitions, dividends, transactions with affiliates,
    prepayments of any other indebtedness, modifications of our
    organizational documents and restrictions on our subsidiaries.
    The credit facility contains events of default that are
    customary for similar facilities and transactions, including a
    cross-default provision with respect to any other indebtedness
    and an event of default that would be triggered by a change of
    control, as defined in the credit facility, and which is not
    expected to be triggered by this offering. As of June&#160;30,
    2009, December&#160;31, 2008 and 2007, we were in compliance
    with all covenants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have the right to optionally prepay our borrowings under the
    term loan or the revolving credit facility, subject to the
    procedures set forth in the credit facility. We may be required
    to make prepayments on our borrowings under the term loan or the
    revolving credit facility if we receive proceeds as a result of
    certain asset sales, debt issuances, events of loss or if we
    have excess cash flow (as defined in the credit facility).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009, $68.4&#160;million of borrowings were
    outstanding under the term loan and $0 was outstanding under the
    revolving credit facility. As of December&#160;31, 2008,
    $69.3&#160;million of borrowings were outstanding under the term
    loan and $0 was outstanding under the revolving credit facility.
    For the six months ended June&#160;30, 2009 and for year ended
    December&#160;31, 2008, the weighted average interest rate under
    the term loan was 3.76% and 7.03%, respectively, before giving
    effect to the interest rate swap. The rate on our interest rate
    swap is the difference between our fixed rate of 4.035% and the
    floating rate of three-month LIBOR.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    61
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Contractual
    Obligations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2008, our contractual obligations and
    other commitments were as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="32%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="14%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Payments due by period</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Less than 1&#160;year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>1-3&#160;years</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>3-5&#160;years</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>More than 5&#160;years</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt obligations(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    69,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    66,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating lease obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,467
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    462
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,005
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Interest payments based on variable interest rates on our
    long-term debt obligations are excluded from our contractual
    obligations.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Off-Balance
    Sheet Arrangements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not have any off-balance sheet arrangements.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Qualitative
    and Quantitative Disclosures about Market Risk</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Interest
    Rate Risk</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are exposed to interest rate risk in connection with our term
    loan and any borrowings under our revolving credit facility.
    Amounts borrowed under our term loan and our revolving credit
    facility bear interest at rates based upon a base rate or LIBOR,
    plus an applicable margin. To manage our interest rate exposure,
    and as a requirement under our term loan, we entered into an
    interest rate swap agreement with a notional amount totaling
    $45.5&#160;million, of which $40.5&#160;million remained in
    effect as of June&#160;30, 2009. The notional amount of the
    interest rate swap will decrease in periodic amounts to a
    notional amount of $30.5&#160;million at the December 2010
    termination date. We swapped a floating rate payment based on
    three month LIBOR for a fixed rate of 4.035% in order to
    minimize the variability in expected future cash flow due to
    interest rate movements on our LIBOR-based variable rate debt.
    Based on the amount outstanding under our term loan at
    June&#160;30, 2009, we believe that a 1% increase in the
    applicable interest rate, before giving effect to the interest
    rate swap, would cause an increase in our interest expense of
    approximately $0.7&#160;million on an annual basis. Because the
    short-term LIBOR, which we use to determine our term loan
    interest rate, is less than 1%, it cannot decrease by 1%, and
    any decrease would result in a decrease in our interest expense.
    For further information on our interest rate swap agreement, see
    &#147;&#151;&#160;Components of Service Revenue and
    Expense&#160;&#151; Other Income (Expense)&#148; above and
    note&#160;2 to our audited consolidated financial statements
    included elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our interest income is sensitive to changes in the
    general level of U.S.&#160;interest rates. We had unrestricted
    cash and cash equivalents of $15.9&#160;million and
    $13.1&#160;million as of June&#160;30, 2009 and
    December&#160;31, 2008, respectively. Our unrestricted cash and
    cash equivalents are maintained primarily in short term,
    treasury-backed accounts.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Effects
    of Inflation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that inflation has not had a material impact on our
    results of operations in the periods presented. We cannot assure
    you that future inflation will not affect our operating expense
    in future periods.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recently
    Issued Accounting Standards</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2007, the FASB issued FASB Statement
    No.&#160;141(R), <I>Business Combinations, </I>which establishes
    principles and requirements for how an acquirer recognizes and
    measures in its financial statements the identifiable assets
    acquired, the liabilities assumed, non-controlling interest in
    the acquire, and the goodwill acquired. FASB Statement
    No.&#160;141(R) also establishes disclosure requirements to
    enable the evaluation of the nature and financial effects of the
    business combination FASB Statement No.&#160;141(R) is effective
    for financial statements issued for fiscal years beginning after
    December&#160;15, 2008, and early adoption
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    62
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    is prohibited. The implementation of this standard did not have
    a material effect on our financial condition or results of
    operations. We will assess the impact of this standard when and
    if future acquisitions occur.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In February 2008, the FASB issued FASB Staff Position
    (&#147;FSP&#148;)
    <FONT style="white-space: nowrap">FAS&#160;No.&#160;157-2,</FONT>
    <I>Effective Date for FASB Statement No.&#160;157</I>. This FSP
    permitted the delayed application of SFAS&#160;157 for all
    nonrecurring fair value measurements of nonfinancial assets and
    nonfinancial liabilities until fiscal years beginning after
    November&#160;15, 2008. We adopted this portion of the statement
    on February&#160;1, 2009, and the adoption did not have a
    material impact on our consolidated financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2008, the FASB issued FASB Statement No.&#160;161,
    <I>Disclosures about Derivative Instruments and Hedging
    Activities&#160;&#151; an amendment of FASB Statement 133</I>.
    FASB Statement No.&#160;161 requires enhanced disclosures about
    a company&#146;s derivative and hedging activities. These
    enhanced disclosures will discuss (a)&#160;how and why a company
    uses derivative instruments, (b)&#160;how derivative instruments
    and related hedged items are accounted for under FASB Statement
    No.&#160;133 and its related interpretations, and (c)&#160;how
    derivative instruments and related hedged items affect a
    company&#146;s financial position, results of operations, and
    cash flows. FASB Statement No.&#160;161 is effective for fiscal
    years beginning on or after November&#160;15, 2008, with earlier
    adoption allowed. The implementation of this standard did not
    have a material effect on our consolidated financial condition
    or results of operations for interim periods beginning
    January&#160;1, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In April 2008, the FASB issued FSP FASB
    <FONT style="white-space: nowrap">No.&#160;142-3,</FONT>
    <I>Determination of the Useful Life of Intangible Assets</I>.
    FSP FASB
    <FONT style="white-space: nowrap">No.&#160;142-3</FONT>
    amends the factors that should be considered in developing
    renewal or extension assumptions used to determine the useful
    life of a recognized intangible asset under FASB Statement
    No.&#160;142. FSP FASB
    <FONT style="white-space: nowrap">No.&#160;142-3</FONT>
    is effective for fiscal years beginning after December&#160;15,
    2008. The implementation of this standard did not have a
    material effect on the our consolidated financial condition or
    results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In April 2009, the FASB issued FSP
    <FONT style="white-space: nowrap">No.&#160;FAS&#160;107-1</FONT>
    and APB
    <FONT style="white-space: nowrap">28-1,</FONT>
    <I>Interim Disclosures about Fair Value of Financial Instruments
    </I>(&#147;FSP
    <FONT style="white-space: nowrap">FAS&#160;107-1</FONT>
    and APB
    <FONT style="white-space: nowrap">28-1&#148;).</FONT>
    This FSP amends SFAS&#160;No.&#160;107, <I>Disclosures about
    Fair Value of Financial Instruments</I>, to require disclosures
    about fair value of financial instruments in interim as well as
    in annual financial statements. This FSP also amends Accounting
    Principles Board (&#147;APB&#148;) Opinion No.&#160;28,
    <I>Interim Financial Reporting</I>, to require those disclosures
    in all interim financial statements. FSP
    <FONT style="white-space: nowrap">FAS&#160;107-1</FONT>
    and APB <FONT style="white-space: nowrap">28-1</FONT>
    were effective for interim and annual periods ending after
    June&#160;15, 2009. We adopted these provisions on
    August&#160;1, 2009, which resulted in a new disclosure in our
    consolidated financial statements (see note&#160;3 to the
    consolidated financial statements included elsewhere in this
    prospectus).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009, the FASB issued SFAS&#160;No.&#160;165,
    <I>Subsequent Events </I>(&#147;SFAS&#160;165&#148;). This
    statement provides general standards for the accounting and
    reporting of subsequent events that occur between the balance
    sheet date and issuance of financial statements. The statement
    requires the issuer to recognize the effects, if material, of
    subsequent events in the financial statements if the subsequent
    event provides additional evidence about conditions that existed
    as of the balance sheet date. The issuer must also disclose the
    date through which subsequent events have been evaluated and the
    nature of any nonrecognized subsequent events. Nonrecognized
    subsequent events include events that provide evidence about
    conditions that did not exist as of the balance sheet date, but
    which are of such a nature that they must be disclosed to keep
    the financial statements from being misleading. The statement is
    effective for interim and annual periods ending after
    June&#160;15, 2009. We have considered subsequent events through
    September&#160;2, 2009, related to our consolidated financial
    statements included elsewhere in the registration statement of
    which this prospectus is a part.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issues FASB Statement No.&#160;168,
    <I>The &#147;FASB Accounting Standards Codification&#148; and
    the Hierarchy of Generally Accepted Accounting
    Principles&#160;&#151; a Replacement of FASB Statement
    No.&#160;162</I>. FASB Statement 168 provides for the FASB
    Accounting Standards Codification (the &#147;Codification&#148;)
    to become the single official source of authoritative,
    nongovernmental U.S.&#160;GAAP. The Codification did not change
    GAAP but reorganizes the literature. FASB Statement 168 is
    effective for interim and annual periods ending after
    September&#160;15, 2009. We will begin to use the Codification
    when referring to GAAP in our financial statements for the third
    quarter of 2009. This will not have an impact on our financial
    position, results of operations of cash flows.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    63
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='112'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INDUSTRY
    AND MARKET DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus includes industry and market data that we
    obtained from periodic industry publications, third-party
    studies and surveys, filings of public companies in our industry
    and internal company surveys. These sources include the National
    Center for Education Statistics, the World Economic Forum, the
    Nielsen Company, Outsell, Inc., U.S.&#160;Bureau of Labor
    Statistics, Consortium for School Networking and Market Data
    Retrieval. Industry publications and surveys generally state
    that the information contained therein has been obtained from
    sources believed to be reliable. Although we believe the
    industry and market data to be reliable as of the date of this
    prospectus, this information could prove inaccurate. Industry
    and market data could be wrong because of the method by which
    sources obtained their data and because information cannot
    always be verified with complete certainty due to the limits on
    the availability and reliability of raw data, the voluntary
    nature of the data gathering process and other limitations and
    uncertainties. In addition, we do not know all of the
    assumptions regarding general economic conditions or growth that
    were used in preparing the forecasts from sources cited herein.
</DIV>

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    <B><FONT style="font-family: 'Times New Roman', Times">BUSINESS</FONT></B>
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</A>
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    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Company</FONT></B>
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning is a leading subscription-based online
    education company. We provide standards-based instruction,
    practice, assessments and productivity tools that improve the
    performance of educators and students via proprietary web-based
    platforms. Study Island, our core product line, helps students
    in Kindergarten through 12th&#160;grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year, Study Island products were utilized by
    approximately 8.3&#160;million students in over 19,200 schools
    in 50&#160;states who answered over 2.8&#160;billion of our
    practice questions. We recently began offering classroom and
    school website portals, digital lockers and teacher productivity
    tools through our TeacherWeb services and online postsecondary
    programs through our Northstar Learning product line.
</DIV>

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    We capitalize on two significant trends in the education market:
    (1)&#160;an increased focus on higher academic standards and
    educator accountability for student achievement, which has led
    to periodic assessment in the classroom to gauge student
    learning and inform instruction, also known as formative
    assessment, and (2)&#160;the increased availability and
    utilization of web-based technologies to enhance and supplement
    teacher instruction, engage today&#146;s technology-savvy
    learners and improve student outcomes.
</DIV>

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    Despite spending an estimated $630&#160;billion in the
    <FONT style="white-space: nowrap">2007-2008</FONT>
    school year on K-12 education&#160;&#151; more than any other
    developed country&#160;&#151; the United States ranks
    25th&#160;in the world in the quality of its primary education
    system, according to the World Economic Forum. In response to
    this gap, policymakers and parents are paying greater attention
    to the effectiveness of U.S.&#160;public schools, demanding
    higher educational standards and accountability from teachers,
    administrators and school districts. In addition, increased
    usage and acceptance of online technology is changing how
    educational content, such as lessons, homework and assessments,
    is delivered and utilized. These new educational tools and
    technologies help improve the learning experience of students by
    augmenting the teaching techniques of skilled teachers and
    supporting and strengthening the skills of inexperienced or less
    effective instructors. An estimated $11.5&#160;billion was spent
    on the K-12 instructional materials market in 2008, according to
    Outsell. In 2009, Outsell projects that spending on
    instructional content will grow by about 2-4%, and spending on
    assessment, tutoring and test preparation services will grow by
    about 4.8-5.2%. Between 2010 and 2012 the overall market is
    expected to grow at an annual compounded growth rate of 5.5%
    according to Outsell.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Study Island products are designed to improve educational
    results and meet accountability criteria, leveraging the
    widespread adoption of online technologies. Study Island
    combines rigorous content that is highly customized to specific
    standards in reading, math, science and social studies with
    interactive features that reinforce and reward student
    accomplishments. We believe faculty and school administrators
    purchase Study Island because it is an innovative, low-cost and
    high-impact solution for enhancing teacher effectiveness,
    promoting student learning of core subject concepts and skills
    and preparing students for state standardized tests. By enabling
    teachers to track student performance in real-time, Study Island
    facilitates differentiated instruction to address learning gaps
    for individual students, while allowing administrators to
    monitor student progress and measure teacher effectiveness.
    Study Island was recognized as one of the top
    100&#160;educational products for the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year by District Administration magazine&#146;s
    reader&#146;s choice survey.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our flexible web-based distribution model and in-house content
    development capabilities allow us to continually update and
    improve our products, distribute our products in a
    cost-efficient manner, and price our products affordably. Over
    the last nine years we have created a digital library of
    approximately 306,000 proprietary questions and explanations, a
    simple but elegant content management system and HTML authoring
    system, and a built-in ability to dynamically generate
    additional questions.
</DIV>

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    We have significantly grown the number of students and schools
    served by our products since our inception in 2000. From 2000 to
    2006, we concentrated our efforts on developing our Study Island
    products, increasing from 27 products to 429 products during
    that period. In 2007, we began focusing on managing our growth
    and operations more efficiently, particularly with the hiring of
    our current management team. In
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    addition, we have developed a sophisticated sales and marketing
    force that has been successful in growing our sales and customer
    base. We increased the number of school customers and registered
    student users of our Study Island products, from approximately
    7,800 and 3.0&#160;million, respectively, in 2006, to over
    19,200 and 8.3&#160;million, respectively, in June 2009.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to our Study Island product line, our recently
    acquired TeacherWeb business, which helps teachers and schools
    create website portals to improve teacher productivity and
    school-to-home communications, provides another area for growth
    as teaching environments continue to modernize. We also intend
    to utilize our content development and assessment expertise to
    target various instruction, assessment and exam preparation
    areas within the postsecondary education market through our
    Northstar Learning product line, which provides instruction,
    practice, assessment and test preparation for targeted high
    enrollment postsecondary course areas.
</DIV>

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    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Markets</FONT></B>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U.S.&#160;educational system, consisting of K-12 and
    postsecondary education, collectively includes approximately
    74&#160;million students and approximately $1 trillion in
    educational expenditures according to NCES.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    K-12 Education Market</FONT></I></B>
</DIV>

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    The U.S.&#160;K-12 education market consists of approximately
    54&#160;million students in more than 112,600 schools, according
    to MDR. The U.S.&#160;K-12 school system has over 90,600 public
    schools in over 15,200 school districts and county and regional
    centers and more than 22,000 private and Catholic schools,
    according to MDR.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Key
    Dynamics in the K-12 Education Market</FONT></I>
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A number of key dynamics have impacted the K-12 education market
    in recent years:
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Increased Accountability.</I>&#160;&#160;Despite spending an
    estimated $630&#160;billion during the
    <FONT style="white-space: nowrap">2007-2008</FONT>
    school year on K-12 education&#160;&#151; more than any other
    developed country&#160;&#151; the United States ranks
    25th&#160;in the world in the quality of its primary education
    system, according to a
    <FONT style="white-space: nowrap">2008-2009</FONT>
    report by the World Economic Forum, which describes this as a
    &#147;competitive disadvantage.&#148; American students are
    slipping further behind their foreign peers in international
    assessments, and fewer are showing an interest in the science,
    technology, engineering and math fields that are vital to
    innovation and entrepreneurial vigor. Within the United States,
    there exists a growing disparity in the academic performance of
    students in public schools in affluent communities compared to
    that of students in poorer neighborhoods. As a result,
    policymakers and parents have paid greater attention to the
    effectiveness of U.S.&#160;public schools, demanding higher
    educational standards and accountability from teachers,
    administrators and school districts. States publish
    accountability reports that show each school&#146;s progress and
    ability to meet proficiency standards, and these results are
    often reported by local press outlets. This increased visibility
    into school performance has led to increased parent and
    policymaker pressure on schools and teachers, including at the
    presidential level. President Obama&#146;s administration has
    launched the $4.35&#160;billion &#147;Race to the Top&#148; fund
    to highlight and replicate innovative education strategies as
    part of the administration&#146;s highly publicized efforts to
    reform education.
</DIV>

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    <I>Legislative Developments.</I>&#160;&#160;In 2001, Congress
    passed the reauthorization of the Elementary and Secondary
    Education Act, commonly referred to as No Child Left Behind, or
    NCLB. NCLB requires states receiving federal funding for
    education to establish high, state-wide, academic standards in
    reading, mathematics and science for students in grades 3
    through 8 and in high school and to assess students&#146;
    proficiency in meeting these standards annually. NCLB requires
    states to set incremental milestones for all students to show
    yearly proficiency improvements, with the goal that all students
    perform at grade-level proficiency by 2014. As states
    implemented new, higher academic standards and assessments in
    response to NCLB, it became clear that after the first two years
    of implementation, many schools, particularly those in large,
    urban, poorer communities were not meeting NCLB&#146;s Adequate
    Yearly Progress, or AYP, milestones. As a result, educators
    began exploring instructional tools to help students master
    academic standards and improve
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    performance on accountability assessments. This has driven
    demand for standards-based content and both formative and
    summative, or end-of-year, assessment products. The Elementary
    and Secondary Education Act initially was scheduled for
    reauthorization in October 2008, but was extended until October
    2009 in order to allow the new U.S.&#160;presidential
    administration to impact the direction of any future
    reauthorization. More recently, in early 2009, Congress passed
    the American Recovery and Reinvestment Act, better known as the
    stimulus act, which provides more than $64&#160;billion of
    federal funds for the Department of Education, with a phased
    roll-out of such funds to states between April 2009 and the
    spring of 2010. In order to receive these education funds,
    states must satisfy certain conditions, which are expected to
    correspond with the basic tenets of NCLB reauthorization. These
    conditions include assurances that states will strive to meet
    more rigorous educational standards, improve underperforming
    schools, lower high school dropout rates and ensure student
    readiness for success in college and in the workforce.
</DIV>

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    <I>Increased Access to Computers and the
    Internet.</I>&#160;&#160;Today&#146;s students use computer
    technology in and out of the classroom, and many students have
    access to internet-enabled computers at school and home.
    Increased usage and acceptance of online technology is changing
    how educational content is delivered and utilized by teachers
    and students. According to the Consortium for School Networking,
    98% of rural and wealthy schools have high-speed internet access
    in classrooms, as do 93% of classrooms in poor urban school
    districts. More than 80% of Americans now have a computer in
    their homes and, of those, almost 92% have internet access,
    according to a study on home internet access from The Nielsen
    Company. In addition, NCLB mandates that schools improve
    school-to-home or school-to-parent communication and involvement
    in their child&#146;s education. As a result, schools are
    increasingly looking for integrated website portals and
    productivity tools to more easily comply with this mandate, more
    effectively use student achievement data to keep parents
    informed and more readily guide parents&#146; ability to help
    their children improve their skills and proficiency.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">The
    Market for Supplemental Learning Materials</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Schools use a variety of supplemental materials to augment their
    core curriculum, provide remediation and enrichment and offer
    additional learning opportunities in the classroom and at home.
    These materials include traditional print-based materials, such
    as textbooks, workbooks, problem sheets and printed reading
    materials. With increased availability and use of computers in
    the classroom and at home, vendors have developed software and,
    increasingly, online programs and content as an alternative to
    print-based materials.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An estimated $11.5&#160;billion was spent on the K-12
    instructional materials market in 2008, according to Outsell. In
    2009, Outsell projects that spending on instructional content
    will grow by about 2-4%, and spending on assessment, tutoring
    and test preparation services will grow by about 4.8-5.2%.
    Between 2010 and 2012 the overall market is expected to grow at
    an annual compounded growth rate of 5.5% according to Outsell.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Increased accountability, combined with the need for districts
    and states to meet the requirements of NCLB and other
    legislative developments, has resulted in a significant decrease
    in spending on traditional print-based and software-based
    supplemental materials and a growing market for innovative
    online programs that offer functionality and real-time
    assessment and reporting not provided by traditional solutions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Limitations of Traditional Print
    Products.</I>&#160;&#160;Educators increasingly are recognizing
    the limitations of traditional print-based textbook and workbook
    learning materials, which are static, cannot be quickly
    corrected for errors or updated to address evolving standards,
    cannot provide individualized feedback to students, do not
    provide teachers with a method to quickly track student progress
    and become ragged and obsolete with time and usage. Such
    traditional print-based learning materials are costly and need
    to be replaced on a regular basis due to the publication of
    newer editions or, in the case of workbooks, use by students.
    These materials also do not provide administrators with easily
    obtainable metrics to measure the performance of classes,
    teachers or individual grades in their schools on a regular
    basis.
</DIV>

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    <I>Limitations of Software Products.</I>&#160;&#160;As a result
    of the recognition of the limitations of print-based products
    and the perceived advantages of computer-based materials,
    educators began to utilize software-based supplemental
    materials, such as CD-ROMs. However, these materials also have
    significant limitations.
</DIV>

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    Software products are designed to run on specific operating
    systems with specific memory requirements, and require
    installation on individual computers or costly and
    time-consuming installations on centralized computer systems.
    Software products place increased demands on schools&#146;
    limited IT personnel, systems and budgets. Access to these
    products is typically limited to the computers in a specific
    classroom or computer lab and cannot be used at home unless
    schools provide a student with a disk containing the software
    and the student has access to a computer with the appropriate
    operating system or ability to play a CD-ROM. Any updates
    require the publication, receipt, distribution and installation
    of new software or CD-ROMs, which could take months and require
    the school to purchase new versions. In addition, software-based
    products are typically unable to provide real-time feedback
    about student performance to teachers or educators.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Advantages of Online Learning
    Solutions.</I>&#160;&#160;Online products can provide educators
    with real-time feedback on student progress, allowing for
    tailored instruction based on individual student or classroom
    needs, and can generate school-wide reports to administrators.
    Online products also are easily, automatically and frequently
    updated with new or more current content, additional features
    and enhancements and provide students with instant feedback,
    positive reinforcement and remediation when proficiency levels
    are not met. Also, unlike software- or CD-ROM-based learning
    materials, web-based products require no software to be
    installed in school or home computers and can be accessed
    anywhere the internet is available. Web-based products can be
    offered at lower prices as they do not require expenditures for
    publishing, paper or electronic media, shipping or warehousing.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competitive Strengths</FONT></B>
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the following are our key competitive strengths:
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Customized, Standards-Based Content.</I>&#160;&#160;Study
    Island offers online, standards-based instruction, practice and
    assessments for K-12 built from applicable standards in all
    50&#160;states, as well as Washington, DC. We believe this deep
    customization is attractive to educators, providing them with a
    resource that meets their specific state and grade-level
    teaching needs in a variety of subjects. We offer over 1,100
    grade level&#160;Study Island products in math, reading/language
    arts, writing, science and social studies. In addition,
    Northstar Learning offers instruction, practice, assessments and
    test preparation for the GED and allied health licensure exams,
    as well as developmental studies in college readiness
    English/language arts and mathematics.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Real-time Student Tracking, Built-in Remediation and
    Enrichment.</I>&#160;&#160;We provide real-time reporting on
    student achievement, allowing educators to quickly identify
    learning gaps and provide targeted instruction and practice.
    Study Island also provides students with immediate feedback and
    explanations and, when required, remediation content designed to
    build foundational skills in order to accelerate students to
    grade-level proficiency. In addition, our products provide
    professional development materials that provide best-practice
    techniques for teachers to help students grasp key concepts and
    skills.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Engaging, Fun and Easy to Use for
    Students.</I>&#160;&#160;Our products utilize a simple,
    graphical user interface that is intuitive and easy to use. In
    addition, our Study Island products incorporate games and
    rewards in order to make learning fun and engaging for students.
    By engaging students and providing them with the tools they need
    to succeed, we enable them to take control of their own
    learning, boost their confidence and keep them interested in
    using our products, while creating a culture of academic success.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Accessible, Dynamic Web-based Platform.</I>&#160;&#160;Our
    products are delivered entirely online so they can be used by
    teachers and students on computers wherever internet access is
    available, such as classrooms, computer labs, media centers,
    school libraries, public libraries or at home. Our programs are
    compatible with existing school and school district enterprise
    systems and require no additional software, no installation or
    maintenance and no extensive implementation or training.
    Moreover, unlike traditional workbooks or software products, our
    Study Island and Northstar Learning content is easily and
    quickly updated whenever content or functionality enhancements
    are introduced or products are modified due to changes in state
    standards. Similarly, TeacherWeb requires no user HTML or other
    technical knowledge and provides an easy way for teachers to
    upload content to classroom and school websites to keep students
    and parents informed.
</DIV>

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    <I>High Impact, Low Cost Solution.</I>&#160;&#160;Study Island
    offers a comprehensive online educational solution on a hosted
    platform and provides high quality content, assessment and
    reporting for core subjects in a wide range of grade levels.
    This eliminates the need for schools to have multiple vendors or
    systems, thereby simplifying purchasing, training and
    implementation. At an average annual price per student per
    subject of $3.00, or $10.00 per student for all subjects, Study
    Island products are significantly less expensive than competing
    traditional print, software and online alternatives provided by
    large education publishers. TeacherWeb is affordably and
    competitively priced at an average annual cost of $39 per
    teacher/classroom or $935 per school subscription as compared to
    similar applications. Northstar Learning products are priced in
    the $10.00 to $27.00 range and are also substantially less
    expensive than traditional textbook and software products
    currently purchased by students at community colleges, technical
    colleges, proprietary or for-profit colleges.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Management Team with Strong Education Industry
    Expertise.</I>&#160;&#160;Members of our senior management team
    have extensive experience in the education industry and in
    serving the academic community. Our Chief Executive Officer Tim
    McEwen, who has approximately 34&#160;years of experience in the
    industry, and our Chief Financial Officer James Walburg, who has
    27&#160;years of public company accounting and finance
    experience, both joined us in 2007. Our Chief Technology Officer
    Ray Lowrey, who has approximately 14&#160;years of experience in
    the education industry, joined us in 2008. Under their
    leadership, our business has grown significantly and the number
    of school customers and registered student users of our Study
    Island products have increased from approximately 7,800 and
    3.0&#160;million, respectively, in 2006, to over 19,200 and
    8.3&#160;million, respectively, in June 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Key
    Attributes of Business Model</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the following are the key attributes of our business
    model:
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>High Revenue Visibility and Strong Cash Flow
    Generation.</I>&#160;&#160;We believe we have an attractive
    business model characterized by a visible recurring revenue
    stream and high profit margins. Our subscription-based revenue
    model and high recurring revenue provide strong earnings
    visibility. Our operations are designed to achieve and maintain
    attractive profit margins through our highly scalable 100%
    online delivery platform, low research and development
    requirements and viral marketing strategy. In addition, we
    believe our low capital expenditure requirements and up-front
    subscription payments by customers generate strong cash flow and
    high returns on invested capital.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Scalability and Flexibility.</I>&#160;&#160;We continue to
    scale, our business by increasing our product offerings, our
    sales and the number of students, teachers and schools using our
    products without incurring significant incremental expense. Our
    content development processes allow us to quickly and
    inexpensively update or create products and we can easily add
    these new products as well as new users through our single
    online delivery platform. Our flexible sales model incorporates
    in-house web optimization, direct mail and email marketing,
    which allows us to incrementally expand our sales and marketing
    efforts at a relatively low cost. In addition, our centralized,
    online delivery model is more cost-effective for our customers
    relative to traditional licensed and installed software
    solutions and traditional textbook and workbook publishers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Powerful, Demand-Driven Sales and
    Marketing.</I>&#160;&#160;Our Study Island products are often
    introduced into the classroom by principals or teachers, rather
    than mandated by district-level administrators. Approximately
    58% to 78% of surveyed customers of Study Island reported that
    they discovered Study Island through word-of-mouth endorsements
    from other educators, according to annual independent Market
    Measurement surveys of 500 Study Island customers conducted
    since 2006. In addition to this viral demand for our products
    and services, we have a 113 member team of specialized sales and
    marketing professionals who are experienced in generating new
    sales of online educational products. We believe that our focus
    on the classroom and site-level sales results in greater
    customer loyalty, as evidenced by growing revenue from our
    existing customer base. In addition, the price points for our
    Study Island and TeacherWeb products are set at levels that
    typically fall within a school principal&#146;s discretionary
    budget or can be funded by individual teachers or through parent
    fundraising efforts. Once teachers and principals in one school
    become dedicated customers, we believe their recommendations
    often lead to additional sales within the school and other
    schools within the district. Over
</DIV>

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    time, these site-based customer advocates are instrumental in
    helping us gain access to district administrators and achieve
    district-wide purchases.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Growth Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our goal is to be the leading provider of subscription-based
    online education tools across the K-12 and postsecondary
    education markets through the following strategies:
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Expand the Number of Schools Using Our Study Island
    Products.</I>&#160;&#160;In the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year, our Study Island products were used in over 19,200
    schools throughout all 50&#160;states and Washington, DC,
    representing approximately 17.1% of the over 90,600 public and
    22,000 private and Catholic K-12 schools in the United States.
    We believe that there is a significant opportunity to expand the
    number of schools that use Study Island. For example, only
    approximately 10% of our service revenue in 2008 was derived
    from sales of our Study Island products to high schools. We
    believe the Obama administration&#146;s focus on lowering the
    high school drop-out rate and improving high school graduate
    college and job readiness will drive increased demand for our
    high school products. Accordingly, we believe high schools
    provide us with a significant market opportunity. We also
    continue to expand our sales organization in specific states,
    targeting our direct mail and
    <FONT style="white-space: nowrap">e-marketing</FONT>
    efforts to educators in schools that do not use Study Island,
    encouraging a &#147;viral&#148; marketing model through the use
    of customer references and referrals, providing free product
    trials and optimizing the appearance of Study Island in key-word
    searches on leading web search engines. In addition, as we
    deepen our school penetration, we increasingly are focused on
    selling Study Island at the district level.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Increase Revenue per School.</I>&#160;&#160;In many schools
    that we serve, we have the opportunity to sell additional core
    grade level and subject area products, as well as new products,
    such as our benchmark assessments and graphic novel reading
    intervention, to teachers who already subscribe to one or more
    of our products. Our inside sales team specifically targets our
    existing customer base to sell add-on products. As we enhance
    our products with new features and functionality that increase
    the value of Study Island to our customers, we believe we will
    be able to price these enhancements accordingly. We also market
    TeacherWeb to our Study Island customer base. In addition, the
    increased complexity of high school subject matter and related
    assessment standards allow us to price high school products
    higher than those for the elementary and middle school markets,
    and high school enrollments are usually larger, resulting in
    higher average revenue from invoiced sales. We intend to
    leverage our domain expertise in instruction, practice and
    assessment to introduce new high school oriented products,
    including reading and math remediation products and core subject
    end of course and exit exam preparation, advanced placement exam
    preparation, PSAT, SAT, ACT and other test preparation, and high
    school courses for credit and credit recovery.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Develop New Products and Enhance our Online
    Platform.</I>&#160;&#160;We continually develop new Study Island
    products, as well as new features and functionality for our
    online platform, to address student needs and teacher requests.
    These products also provide additional revenue opportunities.
    For example, we recently introduced state-specific benchmark
    assessment products to enable teachers to predict student
    performance and provide diagnostic information to guide
    instruction, as well as a graphic novel reading intervention
    product that is designed to remediate students who are
    significantly below grade-level reading expectations. We plan to
    introduce a new version of our Study Island online platform in
    January 2010, which will include a custom assessment builder,
    lesson plans and lessons, video content, special needs support
    (including expanded text-to-speech functionality), a writing
    utility, digital locker, new and more sophisticated games, and
    embedded professional development for teachers. We also released
    a major product upgrade for TeacherWeb in March 2009 which
    included an updated look, a library of attractive classroom and
    school web designs and enhanced functionality.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Expand Into New Related Markets.</I>&#160;&#160;We believe
    there is a significant opportunity to sell our products and
    services in the postsecondary market and in new geographic and
    end markets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Launched in 2009, Northstar Learning targets the postsecondary
    market utilizing our content development, instruction, exam
    preparation and assessment expertise. Currently, Northstar
    Learning has products in developmental studies for the
    approximately $2.5&#160;billion college remedial studies market
    and in vocational education and licensure exam preparation in
    the
</TD>
</TR>

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    <BR>
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    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    healthcare occupational field. Our Northstar Learning products
    also include GED exam preparation products, and we are planning
    to introduce new PRAXIS teacher certification preparation
    products in the fourth quarter of 2009 and in 2010. We intend to
    develop additional Northstar Learning products to address other
    technical career certification exams. We plan to expand our
    marketing efforts to increase awareness of the Northstar
    Learning brand and products.
</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We are planning to introduce our Study Island products in the
    three largest English-speaking Canadian provinces in fourth
    quarter of 2009. We believe other English-speaking countries,
    including the United Kingdom, Australia, New Zealand and South
    Africa, also provide potential near-term growth opportunities,
    and we intend to develop products for these markets. In
    addition, we are exploring the opportunities to sell Study
    Island products directly to parents as well as expanding our
    sales efforts to public libraries, school libraries and
    homeschool settings.
</TD>
</TR>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Pursue Acquisitions and Strategic
    Relationships.</I>&#160;&#160;Since 2007, we have sought
    acquisitions and strategic alliances that expand our product and
    service offerings and provide additional revenue opportunities,
    such as our recent acquisition of TeacherWeb. We intend to
    continue to pursue acquisitions that have products, services and
    businesses that are compatible with our Archipelago Learning
    brand identity, culture and corporate mission. We expect that
    our acquisition activity will be focused primarily on web-based
    products and services for our target markets. In addition, we
    believe our large student audience of over 8&#160;million K-12
    students provides a significant and valuable opportunity to
    enter into strategic relationships in order to cross-sell other
    appropriate, teacher- and parent-approved products to our
    students.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Products and Services</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning is a leading subscription-based online
    education company. Our products provide standards-based
    instruction, practice, assessments and productivity tools that
    improve the performance of educators and students via
    proprietary web-based platforms.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Core
    Educational Principles</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that one of the keys to our success lies in our core
    educational principles that guide product design and development:
</DIV>

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    <TD width="87%"></TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Clear expectations.</I>&#160;&#160;Each Study Island and
    Northstar Learning session focuses on an academic standard or
    underlying topic and sets forth a clear goal for the student to
    master the targeted skill or concept.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>High quality, rigorous content.</I>&#160;&#160;We have
    internal subject area writer and editor expertise and deep
    knowledge of each set of specific standards for which we offer
    products. We build content from the
    <FONT style="white-space: nowrap">ground-up,</FONT>
    customized to each set of standards for a particular subject. We
    utilize a scaffolding approach to content development that
    begins with skill building and then builds to higher level
    thinking skills. This &#147;building block&#148; learning
    approach ensures that students master grade level content and
    are prepared for state assessments.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Fun and engaging assignments.</I>&#160;&#160;Study Island
    sessions are embedded with short games segments and reward
    student mastery of standards with achievement certificates.
    These features provide continual positive reinforcement and
    reward learning to engage students and build student confidence.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Immediate feedback.</I>&#160;&#160;Students receive immediate
    feedback and explanations for each question, allowing them to
    learn and quickly apply new knowledge to subsequent questions
    and to build skills and conceptual understanding in order to
    handle more complex content that follows.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Student responsibility for learning.</I>&#160;&#160;Study
    Island automatically offers explanations and prescribes remedial
    or &#147;building block&#148; topics when a student does not
    master a standard or sub-topic, allowing the student to quickly
    address any learning weakness. The student can continue with
    these remediation topics until he or she gradually accelerates
    back to grade level proficiency, receiving built-in rewards for
    learning along the way.
</TD>
</TR>

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    <BR>
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Study
    Island</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island offers subscription-based online products that
    provide standards-based instruction, practice, assessment and
    productivity tools for teachers and students. Each of Study
    Island&#146;s products is specifically built from the
    requirements for a subject area in a grade level in a particular
    state. We offer products for math, reading, language arts,
    writing, science and social studies. Our in-house content
    development team creates between five and ten new subject and
    grade level product offerings a month, and we offer specialty
    products based on national standards in subject areas such as
    technological literacy, health and fine arts. Customers may
    subscribe to any number of products to best suit their
    individual classroom or school needs. Subscriptions are
    typically for one year, although we do sell some multi-year
    subscriptions as well. In the case of certain sales, a limited
    number of additional months may be offered as a promotional
    incentive.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Students can log in to Study Island from any computer with
    internet access. Typically, teachers assign topics based on the
    specific standards or topics that were covered in class during a
    particular week. In some schools, students are permitted to take
    control and move through the Study Island program independently,
    earning awards as each standard is mastered. Once logged in,
    students can select to move through the content in a
    traditional, multiple choice test mode or game mode, which
    includes short game segments to reward student achievement. Each
    topic contains a mini-lesson that can be reviewed by the student
    prior to beginning the session. Teachers can customize sessions
    for the number of questions asked as well as the number of
    correct answers needed to reach proficiency in a standard or
    sub-topic. The questions are dynamically generated and therefore
    constantly changing, compelling students to learn concepts
    rather than memorize answers. Students who master a topic
    receive a &#147;Blue Ribbon Achievement Award,&#148; which is
    denoted by an icon of a blue ribbon beside the topic as well as
    a printable certificate. Upon answering a question incorrectly,
    students are shown the correct answer along with a detailed
    explanation of this response. When students are having
    difficulty answering questions correctly for a particular
    standard or sub-topic and require additional help to reach
    proficiency, Study Island automatically moves them down to
    appropriate &#147;building block&#148; or remedial topics, where
    students can earn &#147;White Ribbon Achievement Awards&#148; as
    they gradually accelerate back to grade level proficiency and
    ultimately earn the &#147;Blue Ribbon Achievement Award.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island has also linked its program to popular classroom
    response hand-held devices, or clickers, which are manufactured
    and sold by other companies and enable Study Island sessions to
    be conducted in the classroom. The teacher typically teaches a
    particular standard or sub-topic and then projects Study Island
    questions on a whiteboard or a projection screen, and students
    answer using their handheld clickers. The teacher immediately
    receives results on his or her computer to determine whether the
    class is comprehending the material or whether additional
    instruction is required. This classroom methodology enables
    teachers to ensure&#160;&#151; as opposed to assume&#160;&#151;
    that learning has effectively occurred.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island offers add-on features and programs, such as a
    benchmark assessment that enables educators to predict student
    performance on the end-of-year state assessment and provides
    diagnostic information to guide instruction. In addition, our
    graphic novel reading intervention product is designed to
    remediate students who are behind in grade level reading. We
    regularly release new product enhancements to increase the value
    of Study Island&#146;s core standard specific learning programs.
    We plan to introduce a new version of our Study Island online
    platform in January 2010, which will include new features and
    functionality most desired by our existing customer base and
    prospects, including a custom assessment builder,
    standards-based lesson plans and lessons, video content, special
    needs support (including expanded text-to-speech functionality),
    a writing utility, new and more sophisticated games, and
    embedded professional development for teachers. In addition, we
    intend to introduce new high school oriented products, including
    reading and math remediation products, end of course and exit
    exam preparation, advanced placement exam preparation, PSAT,
    SAT, ACT and other norm-referenced test preparation, and high
    school courses for credit and credit recovery.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to expand Study Island&#146;s market by releasing its
    first international products in the fourth quarter of 2009 for
    three Canadian provinces: Ontario, Alberta and British Columbia.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    72
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">TeacherWeb</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    TeacherWeb, which we acquired in June 2008, is a website portal
    and productivity tool for educators in the K-12 market, which
    enables teachers and schools to easily and affordably create and
    maintain functional, professional-looking websites. TeacherWeb
    was designed to enable teachers and administrators to quickly
    and easily communicate information to students and parents
    through these websites.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    TeacherWeb&#146;s key features and functions include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    easy access from any internet-connected computer to both view
    and update the site;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    pre-created, customizable templates that do not require any HTML
    knowledge;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a platform for teachers to assign homework, online quizzes and
    structured web-based learning activities called
    &#147;WebQuests&#148;;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    daily productivity and communication tools such as grade books,
    calendars, teacher blogs, supply/wish lists, photo galleries,
    extracurricular events, announcements, cafeteria menus and bus
    schedules;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    digital locker, a safe and secure online storage solution for
    students and teachers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    optional password protection on sensitive page content, such as
    photos and blogs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    ability to upload Microsoft Word, Excel, Powerpoint or Adobe pdf
    files;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    automated
    <FONT style="white-space: nowrap">sign-up</FONT> for
    trials, payment and account management; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    unlimited, free customer support.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our TeacherWeb application is also substantially less expensive
    than competing programs, averaging $39 per year for a
    teacher/classroom subscription and $500 per year for a school
    subscription, making it an easy purchase using discretionary
    funds. We market TeacherWeb as a standalone product and also
    package it with sales of Study Island.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Northstar
    Learning</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In recognition of the significant postsecondary education market
    opportunity, we developed our Northstar Learning product line,
    which was initially launched in April 2009. Northstar Learning
    uses the same proprietary web platform as Study Island, to
    provide instruction, practice, assessment and test preparation
    for targeted high enrollment postsecondary course areas. The key
    features and product functions of Northstar Learning are
    substantially similar to those of Study Island.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently offer Northstar Learning products for GED exam
    preparation, developmental studies in college readiness
    English/language arts and mathematics and allied health, and we
    are planning to launch PRAXIS teacher certification products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>GED exam preparation.</I>&#160;&#160;Northstar Learning
    offers products for each of the five GED testing modules covered
    in the GED exam, which grants a diploma to adults that do not
    have a high school diploma. These modules are reading, writing,
    math, social studies and science.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Developmental Studies.</I>&#160;&#160;Northstar Learning
    offers developmental English/language arts and math programs for
    the approximately 42% of community college freshmen and 20% of
    four-year college freshmen who are required to raise their
    proficiency levels before colleges and universities allow them
    to enroll in credit-bearing courses.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Allied Health programs.</I>&#160;&#160;We recently launched
    six allied health products to help students in these certificate
    and Associate Degree allied health programs master the required
    content and pass the applicable health career licensure exams.
    We intend to launch six additional products in late 2009.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    73
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 5%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#149;&#160;&#160;&#160;&#160;&#160;<I>PRAXIS teacher
    certification.</I>&#160;&#160;Northstar Learning plans to
    publish products in late 2009 and early 2010 to assist educators
    to prepare for and pass the PRAXIS series assessments developed
    by the Educational Testing Service and used by states as part of
    their teacher licensure and certification processes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to develop additional Northstar Learning products to
    address other vocational-technical career programs that require
    certification exams and online study guides for more difficult
    college and university courses. We also intend to expand our
    marketing and sales efforts to increase awareness of the
    Northstar Learning brand and products, and replicate our K-12
    sales efforts and word-of-mouth viral marketing in the
    postsecondary market.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Northstar
    Market Opportunity</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We developed Northstar Learning to capitalize on the
    U.S.&#160;postsecondary education market, which is significant.
    NCES estimates that approximately 18.2&#160;million students
    were enrolled in degree-granting postsecondary institutions
    during the
    <FONT style="white-space: nowrap">2007-2008</FONT>
    school year. In 2006, approximately 39&#160;million adults in
    the United States in the
    <FONT style="white-space: nowrap">18-64</FONT> age
    group did not have a high school diploma, but only about 1.5% of
    them earned a GED. Only about 68% of adults who took at least
    one of the five GED tests passed the test in 2006, 72% passed in
    2007 and 73% passed in 2008. In 2008, 777,000 candidates took at
    least one of the five GED tests versus 714,000 in 2006, a 8.8%
    growth rate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, U.S.&#160;adult education enrollment in adult basic
    education, adult secondary education and English as a second
    language programs was about 2.4&#160;million in the
    <FONT style="white-space: nowrap">2006-2007</FONT>
    school year. About 38% of these students were enrolled in basic
    education reading and/or math levels below eighth grade courses,
    16% were enrolled in adult secondary education courses and 46%
    were enrolled in English as a second language courses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Many of the occupations projected to grow the fastest in the
    economy are concentrated in the health care industry. According
    to a U.S.&#160;Bureau of Labor Statistics report, health care
    was the largest U.S.&#160;industry in 2006 and health care will
    generate 3&#160;million wage and salary jobs between 2006 and
    2016, more than any other industry. Many of these occupations
    require some form of licensure or certification, but most
    workers have jobs that require less than four years of college
    education, according to the U.S.&#160;Bureau of Labor Statistics
    report.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Customers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Approximately 97% of our service revenue in 2008 came from Study
    Island subscriptions from U.S.&#160;public and private schools
    and individual buys. In the
    <FONT style="white-space: nowrap">2008-2009</FONT>
    school year, Study Island products were used by approximately
    8.3&#160;million students in over 19,200 schools across
    50&#160;states including Washington, DC. Our principle customers
    are teachers, school principals, curriculum directors,
    Title&#160;I and Title&#160;III directors, superintendents,
    chief technology officers and other administrators. In 2008, the
    average school invoice price for Study Island was $1,854. In
    addition, no single customer accounted for more than 1.5% of our
    total invoiced sales in 2006, 2007 or 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009 TeacherWeb had 110,250 customers across
    14,700 U.S.&#160;and Canadian schools and approximately 301
    international customers across 72 countries.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009, we had 997 Northstar Learning
    subscribers for our GED products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Marketing,
    Sales and Customer Support</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Marketing
    Activities</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our marketing strategy is to continually increase Study Island
    and TeacherWeb brand awareness, to introduce the Northstar
    Learning brand, and to continually generate qualified prospect
    leads for our sales teams. We focus our marketing efforts on
    individual schools, principals and teachers for sales to both
    new and existing customers.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    74
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our primary Study Island marketing activities include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    targeted campaigns to schools, such as search engine marketing,
    direct mail,
    <FONT style="white-space: nowrap">e-mail</FONT>
    marketing and print advertisements;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    participation in tradeshows;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    building on relationships with satisfied school customers to
    target new sales in other schools in the same district, in the
    entire district or in adjacent school districts;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    customer newsletters and advertising inserts sent to schools
    with renewal reminders, including information about new and
    upgraded products;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    webinars for existing customers introducing them to new
    products, add-on features and upgrades;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    incentives such as free months to attract new customers or free
    trials of add-on products to attract renewals; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    assistance by our grant/bid writer and contract manager to
    existing customers for funding, grant requests and completion of
    district contracts.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We market TeacherWeb through tradeshows, web advertising and in
    connection with our Study Island marketing and field sales
    efforts. We are developing our marketing plans for our recently
    launched Northstar Learning product line. We have launched
    successful print advertising campaigns for Northstar Learning
    and expect additional marketing activities to be similar to
    those of Study Island, but with a focus on adult learning
    centers and alternative high schools for GED and postsecondary
    public and private institutions for developmental studies and
    allied health. We recently hired a Northstar Learning marketing
    coordinator who is responsible for search engine optimization,
    direct mail and
    <FONT style="white-space: nowrap">e-mail</FONT>
    marketing campaigns and participation in tradeshows to capture
    sales and qualified leads in the postsecondary market.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island pricing is available on Study Island&#146;s website
    at each state landing page; TeacherWeb&#146;s pricing is
    available on TeacherWeb&#146;s website; and Northstar
    Learning&#146;s pricing is available on Northstar
    Learning&#146;s website. Our products and services are
    strategically priced to fall within the discretionary spending
    budgets of teachers and school administrators. We evaluate our
    pricing on an annual basis and determine increases to reflect
    product enhancements, operating costs, the increased value of
    our products to our customers, and inflation and other economic
    factors impacting our markets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Field-based
    and Inside Sales Channels</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have three sales teams: a Study Island sales team, a
    TeacherWeb sales team and a Northstar Learning sales team.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Study Island sales team, our largest, is led by our vice
    president of sales and is divided into outside or field-based
    sales representatives overseen by five regional managers, a
    smaller inside sales team and an inside account manager with a
    team focused on renewals and sales of add-on products. Our
    field-based sales representatives are strategically located in
    and are responsible for larger enrollment metropolitan customer
    bases, and our inside sales team focuses on sales in more rural
    geographies. Our Study Island sales strategy begins with
    site-based or school level contact and focuses on individual
    school principals and teachers. Additionally, the Study Island
    sales team strives to enhance customer awareness of our newer
    TeacherWeb and Northstar Learning brands.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our TeacherWeb sales team consists of four inside sales and
    customer service representatives, who focus on selling
    TeacherWeb to existing Study Island customers as well as using
    the same Study Island inside sales model and techniques to close
    new sales at the school level. We additionally rely on our
    marketing efforts at tradeshows to generate sales leads and make
    outside sales.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Similar to the Study Island sales team, our Northstar Learning
    sales team consists of four field-based sales representatives
    (east, south, midwest and west) and two inside sales
    representatives who handle rural
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    75
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    accounts, both managed by our national sales manager. This group
    will focus exclusively on adult learning centers and
    postsecondary institutions. Over time, we plan to add more sales
    representatives and eventually hire a dedicated postsecondary
    sales manager.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Customer
    Support</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide our customers with service through our
    Implementation, Training, and Customer Relations teams. Our
    Implementation team provides free customized implementation
    assistance to schools, including contacting schools when we
    detect low levels of usage to learn how we may improve
    implementation and usage of our product in the school. Our
    Training department develops teacher and administrator training
    materials, hosts webinars and conducts site visits and in-school
    training sessions, as well as online trainings and phone
    consultations. Our Customer Relations team provides free
    unlimited support to our customers, who may contact us via
    phone, live chat or by email. Approximately 31% of our Customer
    Relations team are former teachers, and 50% have customer
    service and IT backgrounds. Our Customer Relations team also
    recently won the 2009 STEVIE AWARD, sponsored by Business Week,
    in recognition of its outstanding level of customer service.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competition</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island competes primarily with other providers of
    supplemental educational materials and online learning tools. We
    believe Study Island&#146;s principal competitors include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    providers of online and offline supplemental instructional
    materials for the core subject areas of reading, mathematics,
    science and social studies for K-12 institutions;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    companies that provide K-12-oriented software and online-based
    educational assessment and remediation products and services to
    students, educators, parents and educational institutions;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the assessment divisions of established education publishers,
    including Pearson Education, Inc., The McGraw-Hill Companies and
    Houghton Mifflin Harcourt Company;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    providers of online and offline test preparation materials;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    traditional print textbook and workbook companies that publish
    K-12 core subject educational materials, standardized test
    preparation materials or paper and pencil assessment tools;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    summative assessment companies that have expanded their product
    lines to include formative assessment and instruction products;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    non-profit and membership educational organizations and
    government agencies that offer online and offline products and
    services, including in some cases at no cost, to assist
    individuals in standards mastery and test preparation; and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    providers of website hosting for teachers and schools.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the principal competitive factors in Study
    Island&#146;s market are:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    quality of content and deep customization to standards;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    formative assessment and reporting to inform instruction;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    ease of use, including whether a product is available online;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    program efficacy and the ability to provide improved student
    outcomes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    ability to engage students;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    quality of customer support;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    vendor reputation; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    price.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    TeacherWeb competes primarily with other similar website portal
    and teacher productivity programs designed to help educators
    create and manage classroom and school websites. The K-12 market
    for these
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    76
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    solutions is highly fragmented with no dominant provider.
    TeacherWeb also competes with in-house website development
    efforts at the class, school and district level.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the principal competitive factors in
    TeacherWeb&#146;s market are ease of use, comprehensiveness in
    terms of functionality, particularly education-specific
    features, and price. Other factors include, performance,
    security, scalability, flexibility and reliability of the
    service, quality of customer support and vendor reputation and
    brand awareness.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Northstar Learning competes primarily with textbook, workbook,
    study guide and software products published by the large
    postsecondary publishers, such as Pearson, McGraw-Hill, Cengage,
    Wiley and Mosby (Reed Elsevier).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the principal competitive factors in Northstar
    Learning&#146;s market are similar to those outlined above for
    Study Island.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Technology</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Engineering</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Study Island, TeacherWeb and Northstar Learning systems are
    built upon lightweight platforms enabling our customers to
    access the full set of functionality via a standard browser. Our
    systems operate in a completely hosted manner, eliminating the
    need for our customers to run any special hardware or software.
    This is a basic design criteria in our software architecture, to
    provide the most extensive set of services possible that are
    completely independent from our customer&#146;s unique systems
    environment. We will continue to invest in improving the
    performance, functional depth and the usability of our services
    to better meet our customer&#146;s needs.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our systems are constructed as highly scalable,
    software-as-a-service (SaaS) applications that use commercially
    available hardware and a combination of proprietary and
    off-the-shelf software from companies such as Adobe and
    Microsoft. Our software development team has constructed
    proprietary services and leveraged existing capabilities such as
    database connection pooling and user session management tuned to
    our specific architecture and environment, allowing us to
    continue to scale our service. This provides a stateless
    environment, in which users are not bound to a single server but
    can be routed in the most optimal way to any number of servers,
    with an advanced data caching layer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our systems have been implemented to allow all customers to
    operate as logically separate tenants in the central
    applications and databases. This allows us to spread the cost of
    delivering the total set of services across the user base, such
    that we do not have to manage thousands of distinct applications
    with their own business logic and database schemas. As a result,
    we have the ability to scale our application and core business
    in a very fast and efficient manner. Moreover, we can focus our
    resources on building new functionality to deliver to our
    customer base as a whole rather than on maintaining an
    infrastructure to support each of their distinct applications.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our engineering team is constantly focused on improving and
    enhancing the features, functionality and security of our
    existing service offerings, as well as developing new
    capabilities such as the upcoming release of a new version of
    Study Island. As a result of our proven SaaS model, our existing
    customers will be able to realize the full value of these
    enhancements without the need to go through a massive upgrade
    process.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Operations</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We serve all of our customers and users from a single,
    third-party web-hosting facility located in Dallas, Texas,
    leased from Colo4Dallas, Inc. The Colo4Dallas facility is built
    to a high level of availability and control and is secured by
    around-the-clock guards, biometric access screening and
    escort-controlled access, and is supported by
    <FONT style="white-space: nowrap">on-site</FONT>
    backup generators in the event of a power failure. Bandwidth to
    the internet is provided by multiple independent companies and
    we continuously monitor the performance of this service. The
    monitoring features that exist include centralized performance
    consoles, automated load distribution tools and various
    self-diagnostic tools and programs.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    77
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the fourth quarter of 2009, as part of our disaster recovery
    arrangements, all of our customers&#146; data will be replicated
    in a separate
    <FONT style="white-space: nowrap">back-up</FONT>
    facility near Chicago, Illinois. This is designed to both
    protect our customers&#146; data and ensure service continuity
    in the event of a major disaster. Even in the case of a
    catastrophic disaster at the Colo4Dallas facility, our strategy
    will allow for full operation within 24&#160;hours or less.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Integration
    with District Student Interoperability Systems</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Study Island core web application has been designed to
    integrate with Student Interoperability Systems, or SIS, which
    employ the Student Interoperability Framework, of SIF,
    specifications, as a method for overall student tracking. SIF
    creates a common set of specifications to allow different
    applications to interact and share data, and facilitates the use
    of technology in education. The use of SIF allows Study Island
    to maintain a real-time roster for each one of its SIF enabled
    districts, and facilitates the transition of information from
    one school to another within a district. Our engineering team is
    available to work directly with a school district&#146;s
    technology team to assist with information transfers.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Intellectual
    Property</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We develop proprietary educational content and assessment and
    reporting materials, and a significant majority of the questions
    and materials in our Study Island and Northstar Learning
    products have been developed internally. We rely on copyright
    protection for our internally developed content. We also own or
    license a number of trademarks, service marks, trade secrets and
    other intellectual property rights that relate to our products
    and services. We continue to invest in our intellectual property
    as we develop new content and expand the scope of our products
    and services. As appropriate, we also utilize confidentiality
    and licensing agreements with our employees, students,
    independent contractors and suppliers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We license a portion of our content from third parties. For
    example, we currently license graphic novels from ABDO Books and
    content based on the
    &#147;Timbertoes<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>&#148;

    characters from Highlights for Children. We attempt to use
    internally developed or public domain material in our products
    when possible, but as we continue to develop new products and
    services, we may enter into licenses with additional third
    parties.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We own several internet domain names that include the terms
    Study Island, Archipelago Learning, TeacherWeb and Northstar
    Learning, among others.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009 we had 206&#160;employees, consisting
    of 202&#160;full-time and 4&#160;part-time employees. As of
    June&#160;30, 2009, we had 25&#160;employees in content
    development, 113&#160;employees in sales and marketing,
    46&#160;employees in IT and programming, 22 general and
    administrative employees. None of our employees are represented
    by a collective bargaining agreement. We believe our employee
    relations are good.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Properties</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our corporate headquarters are located in Dallas, Texas, where
    we lease a total of 18,508&#160;square feet of space under a
    lease that expires on May&#160;31, 2012 and 4,656&#160;square
    feet of space under a lease that expires on February&#160;28,
    2010. We do not lease office space for our field-sales
    representatives.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Legal
    Proceedings</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently are not subject to any material litigation or
    regulatory proceedings.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    78
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='114'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Officers and Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the names and ages as of
    September&#160;2, 2009, of each person who is and who will be a
    director or executive officer of Archipelago Learning, Inc. upon
    the Corporate Reorganization and the consummation of this
    offering. The descriptions below include each such person&#146;s
    service as a board member, executive officer or employee of
    Archipelago Learning Holdings, LLC and our predecessors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="26%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="66%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Age</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Position</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tim McEwen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    56
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    President, Chief Executive Officer and Director
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James Walburg
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Executive Vice President, Chief Financial Officer and Secretary
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ray Lowrey
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    51
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Senior Vice President and Chief Technology Officer
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cameron Chalmers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President and Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Julie Huston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    42
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President of Sales
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David Muzzo
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President and Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David Phillips
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael Powell
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    46
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Peter Wilde
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    41
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Chairman
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Tim McEwen </I>has been our Chief Executive Officer since
    March 2007. From January 2004 to March, 2007, Mr.&#160;McEwen
    served as Chief Executive Officer of Harcourt Achieve, Inc., a
    multinational education company. From July 2000 to December
    2003, Mr.&#160;McEwen served as Executive Vice President and
    Chief Operating Officer of Haights Cross Communications, Inc.,
    which specializes in the development and publication of
    educational products. From 1996 to 2000, Mr.&#160;McEwen served
    as President and Chief Executive Officer of Thomson
    Learning&#146;s Higher Education and Lifelong Learning Groups
    (now Cengage Learning), a publisher of print and digital
    educational products. Mr.&#160;McEwen serves on the board of
    directors of Edline Holdings LLC, an educational technology
    company. Mr.&#160;McEwen received a B.S. in Education from East
    Stroudsburg State University and an M.S. in Education from the
    University of Georgia.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>James Walburg </I>has been a vice president and Chief
    Financial Officer since May 2007. From January 2004 to March
    2007, Mr.&#160;Walburg served as Senior Vice President and Chief
    Financial Officer of First American Payment Systems, L.P., a
    large credit card processing company. From September 1994 to
    January 2004, Mr.&#160;Walburg served as Senior Vice President
    of Finance and Administration as well as Vice President and
    Treasurer of IMCO Recycling Inc., a publicly traded metals
    company. Prior to this, Mr.&#160;Walburg also held management
    positions at NTS, Inc. and Diamond Shamrock Corporation.
    Mr.&#160;Walburg is a certified public accountant and received a
    B.S. in Economics from the University of Pennsylvania&#146;s
    Wharton School and an M.B.A. from the Southern Methodist
    University Cox School of Business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Ray Lowrey </I>has been Senior Vice President and Chief
    Technology Officer since September 2008. From July 2007 to
    September 2008, Mr.&#160;Lowrey served as a Senior Vice
    President and Chief Technology Officer of Cengage Learning, a
    publisher or print and digital educational products. Prior to
    August 2007, Mr.&#160;Lowrey also served as Chief Technology
    Officer of Thomson Gale, an educational publisher, and served in
    several senior level positions in technology management and
    software development for EG&#038;G Mound Applied Technologies
    and Monsanto Research Corporation. Mr.&#160;Lowrey received a
    B.S. in Computer Science and an M.B.A. from the University of
    Dayton.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cameron Chalmers </I>co-founded Study Island, in May 2000 and
    has been Vice President and Director since January 2007. Prior
    to founding us, Mr.&#160;Chalmers served as a software
    engineering Lead Developer for Lucent Technologies.
    Mr.&#160;Chalmers received a B.S. from Vanderbilt University.
    Mr.&#160;Chalmers intends to resign from the board of directors
    upon the consummation of this offering but will continue to
    serve as Vice President.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    79
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Julie Huston </I>has been our Vice President of Sales since
    April 2008. Ms.&#160;Huston joined us as an independent
    contractor as a Michigan sales representative in August 2002. In
    January 2007, Ms.&#160;Huston was employed by us as a regional
    sales manager before becoming our Vice President of Sales in
    April 2008. Prior to joining us, Ms.&#160;Huston was Co-Founder
    and President of Training Express. From 1989 to 1991,
    Ms.&#160;Huston also served as Director of Public Relations and
    Advertising for Olympia Entertainment. Ms.&#160;Huston received
    a B.A. in English from the University of Michigan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>David Muzzo </I>co-founded Study Island in May 2000 and has
    been Vice President and Director since January 2007. Prior to
    founding us, Mr.&#160;Muzzo co-founded Captive Marketing
    Concepts, an advertising firm specializing in indoor billboard
    advertising which was later sold to AJ Indoor Advertising in
    1999. Mr.&#160;Muzzo received a B.S. from Vanderbilt University.
    Mr.&#160;Muzzo intends to resign from the board of directors
    upon the consummation of this offering but will continue to
    serve as Vice President.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>David Phillips </I>has been a member of our board of
    directors since January 2007. Mr.&#160;Phillips is a Vice
    President of Providence Equity Partners. Prior to joining
    Providence Equity Partners in 2005, Mr.&#160;Phillips worked at
    Hutchison Whampoa China and at Goldman Sachs in the Principal
    Investment Area. Mr.&#160;Phillips serves on the board of
    directors of Edline Holdings LLC, an educational technology
    company, and JBP Holdings, LLC, which owns Assessment
    Technologies Institute, a provider of online educational
    products, and Jones &#038; Bartlett Publishers, an educational
    publisher for higher education and vocational training.
    Mr.&#160;Phillips received a B.A. from Princeton University and
    an M.B.A. from Harvard Business School.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Michael Powell </I>has been a member of our board of
    directors since December 2008. Mr.&#160;Powell is the chairman
    and chief executive of the MK Powell Group, a communications
    consulting firm, where he has been employed since April 2005.
    Mr.&#160;Powell served also as a Senior Advisor of Providence
    Equity Partners since July 2005. From January 2001 to April
    2005, Mr.&#160;Powell served as Chairman of the Federal
    Communications Commission and just prior, from October 1997 to
    December 2000, as a Commissioner. From December 1996 to October
    1997, Mr.&#160;Powell served as Chief of Staff of the Antitrust
    Division of the Department of Justice. From July 1994 to
    December 1996, Mr.&#160;Powell was an associate in the law firm
    of O&#146;Melveny&#160;&#038; Meyers and clerked for the Hon.
    Harry T. Edwards, Chief Judge of the U.S.&#160;Court of Appeals
    for the D.C. Circuit from July 1993 to July 1994. From March
    1988 to July 1990, Mr.&#160;Powell served as a policy advisor to
    Secretary of Defense Richard B. Cheney. Mr.&#160;Powell serves
    on the board of directors of Cisco Systems, Altegrity, Object
    Video, the Rand Corporation, the Aspen Institute and
    America&#146;s Promise. He also serves on the board of advisors
    for the Disabled Veterans for Life Memorial effort.
    Mr.&#160;Powell received a B.A. in Government from the College
    of William and Mary and received a J.D. from Georgetown
    University Law Center.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Peter Wilde </I>has been a member of our board of directors
    and Chairman since January 2007. Mr.&#160;Wilde is a Managing
    Director of Providence Equity Partners. Prior to joining
    Providence Equity Partners in 2002, Mr.&#160;Wilde was a General
    Partner at BCI Partners, where he began his career in private
    equity investing in 1992. Mr.&#160;Wilde is also a director of
    Asurion Corp., a provider of wireless subscriber services,
    Decision Resources, Inc., a provider of healthcare research,
    Edline Holdings LLC, an educational technology company,
    Education Management Corporation, a provider of post-secondary
    education, JBP Holdings, LLC, which owns Assessment Technologies
    Institute, a provider of online educational products, and Jones
    &#038; Bartlett Publishers, an educational publisher for higher
    education and vocational training, Kerasotes Theatres, Inc., a
    motion picture exhibition company, and Survey Sampling
    International LLC. Mr.&#160;Wilde received a B.A. from Colorado
    College and an M.B.A. from Harvard Business School.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board of
    Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business and affairs are managed under the direction of our
    board of directors. Our bylaws will provide that our board of
    directors will consist of
    between&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    directors. Upon the consummation of this offering, our board of
    directors will consist
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    directors.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    80
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Independence and Controlled Company Exception</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has affirmatively determined
    that&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    are independent directors under the applicable rules of the NYSE
    and Nasdaq and as such term is defined in
    <FONT style="white-space: nowrap">Rule&#160;10A-3(b)(1)</FONT>
    under the Exchange Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After completion of this offering, Providence Equity Partners
    will continue to control a majority of our outstanding common
    stock. As a result, we are a &#147;controlled company&#148;
    within the meaning of the NYSE and Nasdaq corporate governance
    standards. Under these rules, a &#147;controlled company&#148;
    may elect not to comply with certain NYSE or Nasdaq corporate
    governance standards, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement that a majority of the board of directors
    consist of independent directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement that we have a nominating and corporate
    governance committee that is composed entirely of independent
    directors with a written charter addressing the committee&#146;s
    purpose and responsibilities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement that we have a compensation committee that is
    composed entirely of independent directors with a written
    charter addressing the committee&#146;s purpose and
    responsibilities; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the requirement for an annual performance evaluation of the
    nominating and corporate governance committee and compensation
    committee.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following this offering, we intend to utilize these exemptions.
    As a result, we will not have a majority of independent
    directors, our nominating and corporate governance committee and
    compensation committee will not consist entirely of independent
    directors and such committees will not be subject to annual
    performance evaluations. Accordingly, you will not have the same
    protections afforded to shareholders of companies that are
    subject to all of the NYSE or Nasdaq corporate governance
    requirements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board
    Committees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has the authority to appoint committees
    to perform certain management and administration functions. Upon
    the consummation of this offering, our board of directors will
    have three committees: the audit committee, the compensation
    committee, the nominating and corporate governance committee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Audit
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The primary purpose of the audit committee is to assist the
    board&#146;s oversight of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the integrity of our financial statements;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our systems of control over financial reporting and disclosure
    controls and procedures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our compliance with legal and regulatory requirements;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our independent auditors&#146; qualifications and independence;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the performance of our independent auditors and our internal
    audit function;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    all related person transactions for potential conflict of
    interest situations on an ongoing basis; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the preparation of the report required to be prepared by the
    committee pursuant to SEC rules.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the consummation of this offering,
    Messrs.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    will serve on the audit committee.
    Mr.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    will serve as chairman of the audit committee and also qualifies
    as an &#147;audit committee financial expert&#148; as such term
    has been defined by the SEC in Item&#160;401(h)(2) of
    <FONT style="white-space: nowrap">Regulation&#160;S-K.</FONT>
    Our board of directors has affirmatively determined that
    Messrs.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    meet the definition of &#147;independent directors&#148; for the
    purposes of serving on the audit committee
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    81
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    under applicable SEC and the NYSE and Nasdaq rules, and we
    intend to comply with these independence requirements within the
    time periods specified.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The primary purpose of our compensation committee is to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    recommend to our board of directors for consideration, the
    compensation and benefits of our executive officers and key
    employees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    monitor and review our compensation and benefit plans;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    administer our stock and other incentive compensation plans and
    programs and prepare recommendations and periodic reports to the
    board of directors concerning such matters;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    prepare the compensation committee report required by SEC rules
    to be included in our annual report;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    prepare recommendations and periodic reports to the board of
    directors as appropriate; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    handle such other matters that are specifically delegated to the
    compensation committee by our board of directors from time to
    time.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the consummation of this offering,
    Messrs.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    will serve on the compensation committee, and
    Mr.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    will serve as the chairman. Our board of directors has
    affirmatively determined that each
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    meets the definition of &#147;outside director&#148; for the
    purposes of Section&#160;162(m) of the Internal Revenue Code of
    1986, as amended.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Nominating
    and Corporate Governance Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The primary purpose of the nominating and corporate governance
    committee is to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    identify and recommend to the board individuals qualified to
    serve as directors of our company and on committees of the board;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    advise the board with respect to the board composition,
    procedures and committees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    develop and recommend to the board a set of corporate governance
    guidelines and principles applicable to us; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    review the overall corporate governance of our company and
    recommend improvements when necessary.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the consummation of this offering,
    Messrs.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    will serve on the nominating and corporate governance committee,
    and
    Mr.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    will serve as the chairman.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee Interlocks and Insider Participation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the completion of this offering, none of our executive
    officers will serve on the compensation committee or board of
    directors of any other company of which any of the members of
    our compensation committee or any of our directors is an
    executive officer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Code of
    Business Conduct and Ethics</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have adopted a code of business conduct and ethics that
    applies to all of our employees, officers and directors,
    including those officers responsible for financial reporting.
    These standards are designed to deter wrongdoing and to promote
    honest and ethical conduct. The code of business conduct and
    ethics will be available on our website at
    www.archipelagolearning.com. Any amendments to the code, or any
    waivers of its requirements, will be disclosed on our website.
    The information that appears on our website is not part of, and
    is not incorporated into, this prospectus.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    82
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Officers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of our executive officers has been elected by our board of
    directors and will serve until his or her successor is duly
    elected and qualified.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, we have not paid our directors any
    compensation for their board service.
    On&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    our board of directors approved a plan for annual compensation
    for our directors who are not our employees or employees of
    Providence Equity Partners, effective as of the date of the
    consummation of this offering. These directors will receive an
    annual retainer of $&#160;&#160;&#160;&#160;&#160; and a fee of
    $&#160;&#160;&#160;&#160;&#160; for each meeting they attend.
    The annual retainer will be payable at the director&#146;s
    option either 100% in cash or 100% in shares of our common
    stock. In addition, these directors will receive an annual
    restricted share award with a grant date fair market value of
    $&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    which will vest on the first anniversary of the grant date. The
    non-management chair of the audit committee will receive an
    additional $&#160;&#160;&#160;&#160;&#160; fee payable at his or
    her option either 100% in cash or 100% in shares of our common
    stock. No separate committee meeting fees will be paid.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All directors are reimbursed for reasonable travel and lodging
    expenses incurred by them in connection with attending board and
    committee meetings.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of Officer and Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our certificate of incorporation and bylaws provide that we will
    indemnify our directors and officers to the fullest extent
    permitted by Delaware General Corporation Law, or DGCL. Upon the
    completion of this offering, we intend to have in place
    directors&#146; and officers&#146; liability insurance that
    insures such persons against the costs of defense, settlement or
    payment of a judgment under certain circumstances.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our certificate of incorporation will provide that
    our directors will not be liable for monetary damages for breach
    of fiduciary duty, except for liability relating to any breach
    of the director&#146;s duty of loyalty, acts or omissions not in
    good faith or which involve intentional misconduct or a knowing
    violation of law, violations under Section&#160;174 of the DGCL
    or any transaction from which the director derived an improper
    personal benefit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, prior to the completion of this offering, we will
    enter into indemnification agreements with each of our executive
    officers and directors. The indemnification agreements will
    provide the executive officers and directors with contractual
    rights to indemnification, expense advancement and
    reimbursement, to the fullest extent permitted under the
    Delaware General Corporation Law.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There is no pending litigation or proceeding naming any of our
    directors or officers to which indemnification is being sought,
    and we are not aware of any pending or threatened litigation
    that may result in claims for indemnification by any director or
    officer.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    83
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='115'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">COMPENSATION
    DISCUSSION AND ANALYSIS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This compensation discussion and analysis section provides
    information about the material elements of the compensation
    paid, awarded to or earned by our &#147;named executive
    officers,&#148; who consist of our chief executive officer, our
    senior vice president and chief financial officer, and our four
    other most highly compensated executive officers. For 2008, the
    named executive officers were:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Tim McEwen, our President and Chief Executive Officer;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    James Walburg, our Executive Vice President, Chief Financial
    Officer and Secretary;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Ray Lowrey, our Senior Vice President and Chief Technology
    Officer;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Cameron Chalmers, our Vice President and Director;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Julie Huston, our Vice President of Sales; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    David Muzzo, our Vice President and Director.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This compensation discussion and analysis section addresses and
    explains the compensation practices that were followed in 2008
    and prior periods, the numerical and related information in the
    summary compensation and other tables presented below as well as
    a discussion of our anticipated future compensation policy and
    approach.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">History</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, we were a privately held company with a
    limited number of equityholders. As such, we have not been
    subject to stock exchange listing requirements or SEC rules
    requiring a majority of our board of directors be independent or
    relating to the formation and functioning of board committees,
    including a compensation committee. We intend to establish a
    compensation committee in connection with this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Most, if not all, of our prior compensation policies have been
    the product of negotiations between the named executive officers
    and our founders or the board of managers of Archipelago
    Learning Holdings, LLC. Prior to the Providence Equity
    Transactions, compensation for all of our employees was
    determined solely by our founders, Messrs.&#160;Chalmers and
    Muzzo. In connection with the Providence Equity Transactions and
    the hiring of Messrs.&#160;McEwen, Walburg and Lowrey, we
    entered into employment agreements with our founders,
    Mr.&#160;Chalmers and Mr.&#160;Muzzo, as well as with certain of
    our named executive officers, including Mr.&#160;McEwen,
    Mr.&#160;Walburg and Mr.&#160;Lowrey. In August&#160;2009, we
    entered into an employment agreement with Ms.&#160;Huston. In
    August&#160;2009, Messrs. McEwen and Walburg entered into new
    employment agreements, which we refer to as each of their
    &#147;new employment agreements.&#148; The terms of all of those
    employment agreements were negotiated by the employee and the
    board of managers of Archipelago Learning Holdings, LLC.
    Compensation decisions for 2008 relating to our named executive
    officers who were party to employment agreements, including the
    determination of annual bonuses and other incentive-based
    awards, were also made by the board of managers of Archipelago
    Learning Holdings, LLC. Compensation decisions for 2008 relating
    to Ms.&#160;Huston, the only named executive officer who did not
    have employment agreement in 2008, were made collectively by
    Messrs.&#160;McEwen and Walburg, in consultation with the board
    of managers of Archipelago Learning Holdings, LLC.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Objectives
    and Philosophy of Executive Compensation Policy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our objective is to maintain a compensation policy that provides
    a competitive total executive compensation package that attracts
    and retains individuals of exceptional ability and managerial
    talent in a highly competitive market. Our executive
    compensation program is designed to align executive compensation
    with our key strategic, financial and operational goals and with
    the long-term interests of our stockholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After the consummation of this offering, the compensation
    committee will be responsible for implementing and administering
    all aspects of our benefits and compensation plans and programs.
    Members of our compensation committee will be &#147;outside
    directors&#148; for the purposes of Section&#160;162(m) of the
    Internal
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    84
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Revenue Code, as amended. We anticipate that the compensation
    committee will make certain determinations in consultation with
    and based on recommendations by Messrs.&#160;McEwen and Walburg.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2009, the compensation committee will review overall company
    and individual performance, as well as the applicable terms of
    any employment agreements, in connection with the review and
    determination of each named executive officer&#146;s
    compensation. For company performance, it is anticipated that
    the compensation committee will review service revenue, invoiced
    sales and Adjusted EBITDA. See &#147;Prospectus
    Summary&#160;&#151; Summary Historical Consolidated Financial
    and Other Data&#148; and &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of
    Operations&#160;&#151; Components of Service Revenue and
    Expense&#148; for more detailed descriptions of these metrics.
    As an emerging growth company, we believe that increasing
    revenue and profitability are directly related to increasing
    stockholder value and linking compensation with company
    performance in these areas is supportive of the long-term
    interests of stockholders. Ms.&#160;Huston&#146;s performance
    will also be based on the achievement of sales goals, including
    overall sales, new business sales and sales to existing
    customers. For individual performance, we also anticipate that
    the compensation committee will review the executive&#146;s
    achievement of non-financial objectives and will consult with
    and consider the recommendations of Mr.&#160;McEwen. The
    compensation committee may also make compensation decisions on a
    discretionary basis.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate that in future periods, the compensation committee
    may engage an independent outside compensation consultant to
    construct a peer group of companies, provide market information,
    provide advice on market practices and support specific
    decisions regarding compensation for named executive officers.
    In addition, we expect that Messrs.&#160;McEwen and Walburg, in
    consultation with the board of directors, will establish an
    annual budget that will include sales targets and other
    performance-related goals, which the compensation committee may
    consult in making decisions with respect to bonuses and other
    payments.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Tax and
    Accounting Considerations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    While we generally considered the financial accounting and tax
    implications of our executive compensation, neither element was
    a material consideration in the compensation awarded to our
    named executive officers in 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Elements
    of Executive Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our executive compensation includes the following elements: base
    salaries, annual performance bonuses, an equity compensation
    plan, a defined contribution plan and a benefits package.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Base
    Salary</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We establish base salaries for our executive officers generally
    based on the scope and essential elements of each of his or her
    duties, as well as the abilities, performance and experience of
    the named executive officers. We seek to set these salaries
    competitively, with the intent to attract and retain our key
    executive officers. Each of Messrs.&#160;McEwen&#146;s,
    Walburg&#146;s, Lowrey&#146;s, Muzzo&#146;s and Chalmers&#146;s
    and Ms.&#160;Huston&#146;s employment agreement establishes
    their respective base salaries, which may be increased at the
    discretion of the board of managers of Archipelago Learning
    Holdings, LLC. The board of managers of Archipelago Learning
    Holdings, LLC approved increases in each of
    Messrs.&#160;McEwen&#146;s, Walburg&#146;s, Chalmers&#146;s and
    Muzzo&#146;s base salaries for 2008 and approved increases in
    each of Messrs.&#160;McEwen&#146;s and Walburg&#146;s base
    salaries for 2009. The board of managers of Archipelago Learning
    Holdings, LLC also approved each of Messrs. McEwen&#146;s and
    Walburg&#146;s new employment agreements. See
    &#147;&#151;&#160;Employment Agreements.&#148;
    Ms.&#160;Huston&#146;s base salary for 2008 was established by
    the board of managers of Archipelago Learning Holdings, LLC in
    consultation with Messrs.&#160;McEwen and Walburg and has been
    reviewed on an annual basis, based on factors including the
    general performance of our sales team, growth into additional
    sales markets resulting in increased responsibility, the growth
    of our sales team and annual increases in our sales. We
    anticipate that Messrs.&#160;McEwen and Walburg will continue to
    make recommendations and consult with our board of directors and
    the compensation committee in making compensation decisions
    after the completion of this offering.
</DIV>

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    <BR>
    85
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Annual
    Performance Bonus</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe it is important to provide cash incentive bonuses to
    provide incentives for our executive officers to meet annual
    company and individual objectives established by our board of
    directors, in consultation with Messrs.&#160;McEwen and Walburg
    (other than bonuses for the chief executive officer and chief
    financial officer, which were established solely by the board of
    managers of Archipelago Learning Holdings, LLC and will be
    established by our board of directors), and to reward
    performance for meeting those objectives. Bonus arrangements are
    identified in employment agreements and are generally determined
    by company performance as measured against the budget for the
    applicable year. For a discussion of the bonus arrangements in
    the employment agreements for the named executive officers and
    for amounts awarded in 2008, see &#147;&#151;&#160;Employment
    Agreements&#148; and &#147;&#151;&#160;Grants of Plan-Based
    Awards in 2008.&#148; In 2008, the board of managers of
    Archipelago Learning Holdings, LLC made discretionary
    adjustments to the bonus payments to Messrs.&#160;McEwen,
    Walburg, Chalmers and Muzzo set forth in their respective
    employment agreements. We anticipate that the compensation
    committee will also exercise a measure of discretion in
    determining bonus awards in future periods.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Executive officers and other employees who are not party to
    employment agreements are also eligible for annual performance
    bonuses. Ms.&#160;Huston, as the Vice President of Sales, is
    eligible for a performance bonus twice a year, as set forth in
    her employment agreement, and prior to her entry into an
    employment agreement, as established by the board of directors
    in consultation with Messrs.&#160;McEwen and Walburg, reflecting
    performance during the two six-month sales cycles in a calendar
    year, ending in June and December. Historically,
    Messrs.&#160;McEwen and Walburg have determined
    Ms.&#160;Huston&#146;s bonus based on the results during the
    applicable period as compared with target sales levels,
    previously set according to a formula tied to overall sales
    results for the business and specific performance targets. We
    expect that the compensation committee will continue to assess
    Ms.&#160;Huston&#146;s and other members of the sales
    team&#146;s performance bonus in this manner after the
    consummation of this offering. Bonus payments for
    Messrs.&#160;McEwen, Walburg, Lowrey, Chalmers and Muzzo are
    made once a year after our financial results for the prior year
    are available. Bonus payments for our other executive officers
    and employees are made twice a year, based on six-month
    performance periods. We expect that the compensation committee
    will consult with Messrs.&#160;McEwen and Walburg and continue
    to assess these performance bonuses in a similar manner after
    the consummation of this offering.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Equity
    Compensation Plan</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with the Providence Equity Transactions, we
    established the 2007 Equity Compensation Plan as a long-term
    compensation program that compensates our executive officers and
    certain other employees using equity-based awards and
    accordingly compensates our executive officers and certain other
    employees based on the value of our equity. We believe that when
    our executive officers possess an ownership interest in us, they
    have a continuing stake in our long-term success.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the 2007 Equity Compensation Plan we granted Class&#160;B
    and Class&#160;C shares in Archipelago Learning Holdings, LLC to
    our executive officers and certain other employees in accordance
    with the terms of the Archipelago Learning Holdings, LLC
    Agreement. These participation shares were granted to employees
    who we determined to be key employees for our business, in
    connection with certain employee promotions and to certain newly
    hired employees. The Class&#160;B shares vest over time subject
    to the participant&#146;s continued employment with or service
    to Archipelago Learning, LLC. The Class&#160;C shares are
    subject to performance hurdles and holders of the Class&#160;C
    are shares only entitled to distributions if he or she is
    employed by or provides service to Archipelago Learning, LLC at
    the time that distributions are made.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each vested Class&#160;B share and Class&#160;C share is
    entitled to participate in distributions in accordance with the
    terms of the Archipelago Learning Holdings, LLC Agreement. No
    holder of Class&#160;B or Class&#160;C shares is eligible to
    receive distributions until the holders of the Class&#160;A
    shares have received distributions equal to 100% of their
    capital contributions and the holders of Class&#160;A and
    Class&#160;A-2 shares have also received a preferred return of
    12% per annum on the Class&#160;A capital contributions. Once
    these distributions have been made, holders of the Class&#160;A,
    <FONT style="white-space: nowrap">Class&#160;A-2</FONT>
    and vested Class&#160;B shares become eligible to receive
    distributions subject to cumulative percent limitations. No
    distribution can be made on account of a Class&#160;B
</DIV>

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    <BR>
    86
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    share that has not yet vested. Amounts that would otherwise be
    paid on account of these shares are credited to the
    member&#146;s capital accounts and will be distributed once
    these shares have vested. If any unvested shares are forfeited,
    such amounts will be distributed to the Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2</FONT>
    holders on a pro rata basis, in proportion to the number of
    shares held by Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2</FONT>
    holders. In addition, some of the Class&#160;B shares are
    subject to a distribution threshold, which means they are not
    entitled to receive any portion of any distribution until the
    aggregate amount of distributions on all shares outstanding on
    the date of grant of such Class&#160;B shares has exceeded a
    specified distribution threshold. Once the distribution
    threshold has been met, such Class&#160;B shares are entitled to
    participate in distributions. The Class&#160;C shares are not
    entitled to any portion of any distributions until the holders
    of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    have received certain multiples of cash-based returns on their
    respective investment in the Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares.</FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Once the Class&#160;B and Class&#160;C shares become entitled to
    participate in distributions, each Class&#160;B and Class&#160;C
    share entitled to participate in a distribution is entitled to a
    pro rata amount of the distribution payable on the Class&#160;B
    shares and Class&#160;C shares, respectively, in proportion to
    the total number of Class&#160;B shares and Class&#160;C shares,
    respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All Class&#160;C shares and any unvested Class&#160;B shares
    will be forfeited if any participant is no longer our employee.
    All Class&#160;B and Class&#160;C shares will be forfeited if
    the participant&#146;s employment is terminated by us for cause
    or by the participant without good reason. In addition, all
    Class&#160;B shares and Class&#160;C shares will be forfeited
    upon a holder&#146;s breach of any covenants relating to
    non-competition, non-solicitation or non-disclosure in any
    agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The initial public offering is treated as a liquidation event of
    Archipelago Learning Holdings, LLC, and holders of Class&#160;B
    shares and Class&#160;C shares will receive our common stock,
    restricted common stock and/or restricted stock unit awards in
    an amount equal to the value they would have received upon a
    liquidation of Archipelago Learning Holding, LLC with
    liquidation proceeds implied by the initial public offering
    price. In connection with this offering and upon the
    consummation of the Corporate Reorganization, Archipelago
    Learning, Inc. will:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock to our officers, directors and employees who
    hold Class&#160;B shares of Archipelago Learning Holdings, LLC
    in exchange for all of their vested Class&#160;B shares;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of restricted common stock subject to time-based vesting to our
    officers, directors and employees in exchange for all of their
    unvested Class&#160;B shares of Archipelago Learning Holdings,
    LLC;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock and an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    restricted stock, unit awards subject to vesting based on, among
    other things, the trading price of our common stock, to our
    officers, directors and employees (other than our chief
    executive officer, chief financial officer, chief technology
    officer and co-founders) in exchange for their Class&#160;C
    Shares;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of restricted common stock and an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    restricted stock unit awards, in each case subject to vesting
    based on, among other things, the cash returns to Providence
    Equity Partners in respect of shares of common stock held by
    Providence Equity Partners, to our chief executive officer,
    chief financial officer, chief technology officer and
    co-founders in exchange for their Class&#160;C shares.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See &#147;Corporate Reorganization&#148; and &#147;Certain
    Relationships and Related Person Transactions.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, in connection with this offering, our board of
    directors will adopt a new equity benefit plan as described
    under &#147;&#151;&#160;2009 Omnibus Incentive Plan&#148;
    pursuant to which a total
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock will be reserved for issuance. The
    compensation committee will determine, subject to any employment
    agreements, any future equity awards that each named executive
    officer will be granted pursuant to the 2009 Omnibus Incentive
    Plan.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    87
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Benefits</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide the following benefits to our named executive
    officers on the same basis as other eligible employees:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    health, vision and dental insurance;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    life insurance;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    long-term and short-term disability; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a 401(k) defined contribution retirement plan.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we provide a matching contribution to all employees
    of up to 3% of employee contributions to the defined
    contribution retirement plan, plus 50% of the amount of the plan
    participant&#146;s deferred compensation that exceeds 3% of the
    participant&#146;s compensation, but not in excess of 5% of the
    participant&#146;s compensation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Compensation Table</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth certain information with respect
    to compensation for the years ended December&#160;31, 2008, 2007
    and 2006 earned by or paid to our named executive officers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="38%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Class B<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Class C<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Cash<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Salary(1)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Bonus<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards(2)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards(2)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Compensation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name and Principal Position</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tim McEwen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    259,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    123,750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    150,929
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,404
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    540,958
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    President and
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    199,904
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    146,794
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    121,717
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    134,059
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    602,474
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Chief Executive Officer(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James Walburg
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    215,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,965
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    358,359
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Executive Vice President,
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    118,974
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,854
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,779
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,667
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    165,274
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Chief Financial Officer and
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Secretary(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt; background: #CCEEFF">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ray Lowrey
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    82,462
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    75,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,074
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    163,536
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Senior Vice President and
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Chief Technology Officer(5)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Julie Huston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    136,788
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    102,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,099
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,613
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    264,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vice President of Sales(6)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    134,203
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,760
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,505
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,564
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,815
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    171,847
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    249,829
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    249,829
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt; background: #CCEEFF">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cameron Chalmers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    131,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    56,598
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,285
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    318,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vice President(7)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,048
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45,644
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,938
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    230,630
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    213,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    213,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David Muzzo
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    131,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    56,598
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,973
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    321,821
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vice President(8)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,048
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45,644
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,938
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    230,630
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    213,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    213,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Reflects base salary earned during the fiscal year covered.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Reflects the compensation expense we recognized in 2008 and 2007
    for financial statement reporting purposes under FASB Statement
    No.&#160;123(R) with respect to grants of Class&#160;B and C
    participations shares to the named executive officer. These
    values have been determined based on the assumptions set forth
    in Note&#160;11 to our consolidated financial statements for
    2008.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Mr.&#160;McEwen elected to defer payment of his 2007 salary in
    the amount of $199,904 to 2008. Mr.&#160;McEwen&#146;s &#147;All
    Other Compensation&#148; for 2008 includes $340 for group term
    life insurance and $6,064 </TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    88
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    of 401(k) matching benefits. Mr.&#160;McEwen&#146;s &#147;All
    Other Compensation&#148; for 2007 includes $134,059 of
    relocation expenses.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    Mr.&#160;Walburg&#146;s &#147;All Other Compensation&#148; for
    2008 includes $258 for group term life insurance, $450 for
    unused vacation days and $8,600 of 401(k) matching benefits.
    Mr.&#160;Walburg&#146;s &#147;All Other Compensation&#148; for
    2007 includes $2,667 of 401(k) matching benefits.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    Mr.&#160;Lowrey&#146;s &#147;All Other Compensation&#148; for
    2008 includes $92 for group term life insurance and $5,982 of
    relocation expenses.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (6) </TD>
    <TD></TD>
    <TD valign="bottom">
    Ms Huston&#146;s &#147;All Other Compensation&#148; for 2008
    includes $41 for group term life insurance and $9,572 of 401(k)
    matching benefits. Ms Huston&#146;s &#147;All Other
    Compensation&#148; for 2007 includes $4,815 of 401(k) matching
    benefits. Ms.&#160;Huston was engaged as an independent
    contractor until January 2007, at which point she became
    employed by us first as Regional Sales Manager and subsequently
    as the Vice President of Sales. In 2006 she received $249,829 as
    total compensation for her work as an independent contractor
    sales representative. An employment agreement was entered into
    with Ms.&#160;Huston on August&#160;28, 2009. See
    &#147;&#160;&#151; Employment Agreements.&#148;</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (7) </TD>
    <TD></TD>
    <TD valign="bottom">
    Mr.&#160;Chalmers&#146;s &#147;All Other Compensation&#148; for
    2008 includes $35 for group term life insurance and $5,250 of
    401(k) matching benefits. Mr.&#160;Chalmers&#146;s &#147;All
    Other Compensation&#148; for 2007 includes $4,938 of 401(k)
    matching benefits.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (8) </TD>
    <TD></TD>
    <TD valign="bottom">
    Mr.&#160;Muzzo&#146;s &#147;All Other Compensation&#148; for
    2008 includes $35 for group term life insurance and $8,938 of
    401(k) matching benefits. Mr Muzzo&#146;s &#147;All Other
    Compensation&#148; for 2007 includes $4,938 of 401(k) matching
    benefits.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Grants of
    Plan-Based Awards in 2008</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth certain information with respect
    to grants of plan-based awards for the year ended
    December&#160;31, 2008 with respect to the named executive
    officers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="28%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=09 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=09 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=09 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=10 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=10 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=10 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=10 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom">
    <B>Estimated Future Payouts Under Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Incentive Plan Awards(2)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards:<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Estimated Future Payouts Under Non-Equity Incentive Plan
    Awards(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Grant<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Threshold<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Target<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Maximum<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Threshold<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Target<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Maximum<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares(3)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Tim McEwen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    103,950
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    129,938
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    James Walburg
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    May 7, 2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    107,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,288
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,288
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,288
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Ray Lowrey
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Julie Huston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    May 7, 2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,288
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,288
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,288
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Cameron Chalmers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87,544
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87,544
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    David Muzzo
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87,544
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87,544
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents payments made pursuant to the annual performance
    bonus described under &#147;&#151;&#160;Elements of Executive
    Compensation&#160;&#151; Annual Performance Bonus&#148; and as
    set forth in the employment agreements described under
    &#147;&#151;&#160;Employment Agreements.&#148;
    Messrs.&#160;McEwen&#146;s, Walburg&#146;s and Lowrey&#146;s
    target amounts are equal to 40% of each of his base salary, and
    their maximum amounts are equal to 50% of each of his base
    salary, subject to increases or decreases at the discretion of
    the board of managers of Archipelago Learning Holdings, LLC.
    Messrs.&#160;Chalmers&#146;s and Muzzo&#146;s target amounts and
    maximum amounts are equal to two-thirds of each of his base
    salary, subject to increases or decreases at the discretion of
    the board of managers of Archipelago Learning Holdings, LLC. For
    2008, Ms.&#160;Huston&#146;s compensation was determined by
    board of managers of Archipelago Learning Holdings, LLC in
    consultation with Messrs. McEwen and Walburg. The board of
    managers of Archipelago Learning Holdings, LLC determined that
    each of Messrs.&#160;McEwen, Walburg, Chalmers and Muzzo would
    be awarded bonus amounts exceeding the maximum amounts set forth
    for 2008.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
     </TD>
    <TD></TD>
    <TD valign="bottom">
</TD>
</TR>

</TABLE>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    89
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (2) Represents grants of Class&#160;C shares pursuant to the
    2007 Equity Compensation Plan. Holders of Class&#160;C shares
    are entitled to distributions after holders of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    receive certain threshold multiples of cash-based returns on
    their respective Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares,</FONT>
    subject to such Class&#160;C share holders&#146; continued
    employment by us. See &#147;&#151;&#160;Elements of Executive
    Compensation&#160;&#151; Equity Compensation Plan.&#148;</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents grants of Class&#160;B shares, which vest ratably
    over five years from the grant date. See
    &#147;&#151;&#160;Elements of Executive Compensation&#160;&#151;
    Equity Compensation Plan.&#148;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Outstanding
    Equity Awards at 2008 Fiscal Year-End</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth certain information with respect
    to outstanding equity awards of our named executive officers as
    of December&#160;31, 2008 with respect to the named executive
    officers. The market value of the shares in the following table
    is the fair value of such shares at December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="37%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity Incentive<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity Incentive<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Plan Awards:<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Plan Awards:<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Market Value of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Market Value of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares That Have<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>That Have Not<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares That Have<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>That Have Not<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Not Vested ($)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Vested&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Not Vested ($)(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Vested (#)(3)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(1)(3)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tim McEwen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;B Shares(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,947,468
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,226,905
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;C Shares(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,434,335
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    365,150
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James Walburg
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;B Shares(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    407,751
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    245,929
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;C Shares(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    486,867
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    70,291
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ray Lowrey
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;B Shares(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;C Shares(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Julie Huston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;B Shares(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164,318
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    92,566
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;C Shares(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    182,576
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    24,648
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cameron Chalmers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;B Shares(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    456,439
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    287,556
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;C Shares(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    639,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,852
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David Muzzo
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;B Shares(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    456,439
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    287,556
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Class&#160;C Shares(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    639,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,852
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    The market value of unvested shares is based on
    management&#146;s determination of the fair market value at
    December&#160;31, 2008 computed in accordance with
    SFAS&#160;No.&#160;123(R).</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    The unvested Class&#160;B shares vest ratably on an annual basis
    over five years. As of December&#160;31, 2008, 486,867 of
    Mr.&#160;McEwen&#146;s Class&#160;B shares were scheduled to
    vest on January 10 of each of 2009, 2010, 2011 and 2012. As of
    December&#160;31, 2008, 79,116 of Mr.&#160;Walburg&#146;s
    Class&#160;B shares were scheduled to vest on January 10 of each
    of 2009, 2010, 2011 and 2012, and 18,258 of
    Mr.&#160;Walburg&#146;s Class&#160;B shares were scheduled to
    vest on May 7 of each of 2009, 2010, 2011, 2012 and 2013. As of
    December&#160;31, 2008, Mr.&#160;Lowrey had no Class&#160;B
    shares. As of December&#160;31, 2008, 18,258 of
    Ms.&#160;Huston&#146;s Class&#160;B shares were scheduled to
    vest on January 10 of each of 2009, 2010, 2011, 2012 and 2013,
    and 18,258 of Ms.&#160;Huston&#146;s Class&#160;B shares were
    scheduled to vest on May 7 of each of 2009, 2010, 2011, 2012 and
    2013. As of December&#160;31, 2008, 182,575 of
    Mr.&#160;Chalmers&#146; Class&#160;B shares were scheduled to
    vest on </TD>
</TR>

</TABLE>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    90
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    January 10 of 2009 and 91,288 of Mr.&#160;Chalmers&#146;
    Class&#160;B shares were scheduled to vest on January&#160;10 of
    each of 2010, 2011 and 2012. As of December&#160;31, 2008,
    182,575 of Mr.&#160;Muzzo&#146;s Class&#160;B shares were
    scheduled to vest on January 10 of 2009 and 91,288 of
    Mr.&#160;Muzzo&#146;s Class&#160;B shares were scheduled to vest
    on January 10 of each of 2010, 2011 and 2012.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Holders of Class&#160;C shares are entitled to distributions
    after holders of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    receive certain threshold multiples of cash-based returns on
    their respective Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares,</FONT>
    subject to such Class&#160;C share holders&#146; continued
    employment by us.</TD>
</TR>

</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stock
    Vested</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth certain information with respect
    to equity awards of our named executive officers that have fully
    vested as of December&#160;31, 2008 with respect to the named
    executive officers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="68%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares Acquired<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Value Realized<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>on Vesting<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>on Vesting<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)(2)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tim McEwen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    486,867
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    306,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James Walburg
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79,116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    49,843
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ray Lowrey
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Julie Huston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,258
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,502
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cameron Chalmers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    182,575
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    115,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David Muzzo
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    182,575
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    115,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents Class&#160;B shares for each of Messrs.&#160;McEwen,
    Walburg, Chalmers and Muzzo and Ms.&#160;Huston that in each
    case were granted on May&#160;22, 2007 and vested on
    January&#160;10, 2008.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents management&#146;s determination of the fair market
    value at December&#160;31, 2008 computed in accordance with
    SFAS&#160;No.&#160;123(R).</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Pension
    Benefits</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the year ended December&#160;31, 2008, our named executive
    officers received no pension benefits and had no accumulated
    pension benefits.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Nonqualified
    Deferred Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the year ended December&#160;31, 2008, our named executive
    officers received no nonqualified deferred compensation and had
    no deferred compensation balances.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Potential
    Payments Upon Termination or Upon Change in Control</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The information below describes and quantifies certain
    compensation that would become payable under each named
    executive officer&#146;s employment agreement if, as of
    December&#160;31, 2008, his employment had been terminated, if
    80% of the voting securities of Archipelago Learning Holdings,
    LLC or its subsidiaries were to be sold or if all or
    substantially all of the assets of Archipelago Learning
    Holdings, LLC or its subsidiaries were to be sold. Due to the
    number of factors that affect the nature and amount of any
    benefits provided upon the events discussed below, any actual
    amounts paid or distributed may be different. Factors that could
    affect these amounts include the timing during the year of any
    such event.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of Messrs.&#160;McEwen, Walburg, Lowrey, Chalmers and Muzzo
    and Ms. Huston are entitled to payment upon termination of their
    employment pursuant to their respective employment agreements.
    If any of Messrs. McEwen, Walburg, Lowrey, Chalmers or Muzzo or
    Ms. Huston were terminated for cause or if he terminates his
    employment without good reason, he will be entitled to receive
    (i)&#160;his base salary though the termination date;
    (ii)&#160;all benefits that are accrued but unpaid as of the
    termination date; and (iii)&#160;all benefits expressly
    available upon termination of employment in accordance with the
    plans and programs applicable to each
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    91
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    such executive officer on the termination date. If any of
    Messrs.&#160;McEwen, Chalmers or Muzzo were terminated without
    cause or if he terminates his employment for good reason, he
    would additionally be entitled to receive an amount payable
    equal to his base salary during a
    <FONT style="white-space: nowrap">12-month</FONT>
    period commencing on the termination date; if Mr.&#160;Walburg
    or Ms. Huston were terminated without cause or if he or she
    terminates his or her employment for good reason, he or she
    would additionally be entitled to an amount payable equal to his
    or her base salary during a six-month period commencing on the
    termination date; and if Mr.&#160;Lowrey were terminated without
    cause or if he terminates his employment for good reason, he
    would additionally be entitled to an amount payable equal to his
    base salary during a nine-month period, in each case payable in
    equal installments in accordance with our normal payroll
    practices. Under the terms of each of their new employment
    agreements, if either of Messrs.&#160;McEwen or Walburg were
    terminated without cause or for good reason, he would
    additionally be entitled to receive a bonus or pro-rated bonus
    for the year in which the termination date fell. In addition,
    under the terms of his new employment agreement,
    Mr.&#160;Walburg would also be entitled to an amount payable
    equal to his base salary during a
    <FONT style="white-space: nowrap">12-month</FONT>
    period upon termination without cause or for good reason. If any
    of Messrs.&#160;McEwen, Chalmers or Muzzo or Ms.&#160;Huston is
    terminated as a result of the expiration of the term of his or
    her employment or as a result of his or her death or disability,
    he or she is entitled to receive the same payments as he would
    receive if he or she were terminated for cause. If any of
    Messrs.&#160;Walburg or Lowrey were terminated as a result of
    the expiration of the term of his employment, he would be
    entitled to receive the same payments as he would receive if he
    were terminated without cause, and if he were terminated as a
    result of death or total disability, he would be entitled to
    receive the same payments as he would receive if he were
    terminated for cause. Under the terms of each of their new
    employment agreements, if either of Messrs.&#160;McEwen or
    Walburg is terminated as a result of the expiration of the term
    of his employment or as a result of death or disability, he is
    entitled to receive the same payments as he would receive if he
    were terminated for cause.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, upon the sale of more than 80% of the voting
    securities of Archipelago Learning Holdings, LLC or its
    subsidiaries or upon the sale of all or substantially all of the
    assets of Archipelago Learning Holdings, LLC or its
    subsidiaries, Mr.&#160;McEwen may be entitled to the repurchase
    of his equity incentive participation shares in an amount equal
    to $500,000 times the number of his complete years of employment
    with Archipelago Learning Holdings, LLC, such amount to be
    called the incentive gap, or a bonus equal to such incentive
    gap, in each case not to exceed $2,000,000, if at the time of
    the event, the total amount that he would receive in respect of
    these equity incentive shares would be less than $500,000
    multiplied by the total number of his complete years of
    employment by Archipelago Learning Holdings, LLC or its
    subsidiaries.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, upon the sale of more than 80% of the voting
    securities of Archipelago Learning Holdings, LLC or upon the
    sale of all or substantially all of the assets of Archipelago
    Learning Holdings, LLC, each of Messrs.&#160;McEwen&#146;s,
    Walburg&#146;s, Lowrey&#146;s, Chalmers&#146;s, Muzzo&#146;s and
    Ms.&#160;Huston&#146;s unvested Class&#160;B shares will fully
    vest to the extent that his or her employment is not terminated
    prior to such sale or his or her employment with us is
    terminated other than for cause within 60&#160;days prior to the
    execution of definitive and final agreements with respect to
    such sale.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All Class&#160;C shares and any unvested Class&#160;B shares
    will be forfeited if any participant is no longer our employee.
    All Class&#160;B and Class&#160;C shares will be forfeited if
    the participant&#146;s employment is terminated by us for cause
    or by the participant without good reason. In addition, all
    Class&#160;B shares and Class&#160;C shares will be forfeited
    upon a holder&#146;s breach of any covenants relating to
    non-competition, non-solicitation and non-disclosure in any
    agreement.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    92
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes the potential payments to our
    named executive officers assuming that such events occurred as
    of December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="52%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Severance<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Benefit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Incentive<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amounts<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Benefits<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Continuation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Payments<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Tim McEwen</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination for cause or without good reason</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination without cause or for good reason(1)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    259,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    306,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    566,601
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination other than for cause upon a change of
    control(2)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    259,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,533,631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,793,506
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Change of control(3)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,533,631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,533,631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>James Walburg</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination for cause or without good reason</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination without cause or for good reason(1)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    107,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    49,843
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    157,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination other than for cause upon a change of
    control(2)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    107,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    295,772
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    403,273
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Change of control(3)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    295,772
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    295,772
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Ray Lowrey</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination for cause or without good reason</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination without cause or for good reason(1)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    240,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    240,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination other than for cause upon a change of
    control(2)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    240,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    240,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Change of control(3)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Cameron Chalmers</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination for cause or without good reason</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination without cause or for good reason(1)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    131,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    115,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    246,272
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination other than for cause upon a change of
    control(2)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    131,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402,578
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    533,828
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Change of control(3)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402,578
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402,578
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>David Muzzo</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination for cause or without good reason</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination without cause or for good reason(1)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    131,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    115,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    246,272
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination other than for cause upon a change of
    control(2)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    131,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402,578
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    533,828
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Change of control(3)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402,578
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402,578
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Julie Huston</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination for cause or without good reason</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination without cause or for good reason(1)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,502
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Termination other than for cause upon a change of
    control(2)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    104,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    104,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <I>Change of control(3)</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    104,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    104,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 06 -->

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    &#147;Severance Amounts&#148; includes the amount payable to
    each of Messrs.&#160;McEwen, Walburg, Lowrey, Chalmers and Muzzo
    pursuant to each of his agreement as of December&#160;31, 2008.
    &#147;Equity Incentive Payments&#148; includes the fair value of
    each of Messrs.&#160;McEwen&#146;s, Walburg&#146;s,
    Lowrey&#146;s, Chalmers&#146;s and Muzzo&#146;s and
    Ms.&#160;Huston&#146;s vested Class&#160;B shares (which we may
    repurchase from an employee upon a termination without cause or
    for good reason) at December&#160;31, 2008.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
     </TD>
    <TD></TD>
    <TD valign="bottom">
</TD>
</TR>

</TABLE>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes continued on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    93
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 06 -->

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    (2) &#147;Severance Amounts&#148; includes the amount payable to
    each of Messrs.&#160;McEwen, Walburg, Lowrey, Chalmers and Muzzo
    pursuant to his employment agreement as of December&#160;31,
    2008. &#147;Equity Incentive Payments&#148; includes the fair
    value of each of Messrs.&#160;McEwen&#146;s, Lowrey&#146;s,
    Chalmers&#146;s and Muzzo&#146;s and Ms.&#160;Huston&#146;s
    vested Class&#160;B shares (which we may repurchase from an
    employee upon a termination other than for cause upon change of
    control) at December&#160;31, 2008 and unvested Class&#160;B
    shares (which would be accelerated upon a change of control) at
    December&#160;31, 2008.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    &#147;Equity Incentive Payments&#148; includes the fair value of
    each of Messrs.&#160;McEwen&#146;s, Walburg&#146;s,
    Chalmers&#146;s and Muzzo&#146;s and Ms.&#160;Huston&#146;s
    vested Class&#160;B shares (which each employee would in any
    case be entitled to) at December&#160;31, 2008 and unvested
    Class&#160;B shares (which would be accelerated upon a change of
    control) at December&#160;31, 2008.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into employment agreements with each of
    Mr.&#160;McEwen, our chief executive officer, Mr.&#160;Walburg,
    our chief financial officer, Mr.&#160;Lowrey, our chief
    technology officer, Ms.&#160;Julie Huston, our vice president of
    sales, Mr.&#160;Chalmers, our vice president, and
    Mr.&#160;Muzzo, our vice president.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the terms of their respective employment agreements,
    Mr.&#160;McEwen&#146;s annual base salary is $247,500,
    Mr.&#160;Walburg&#146;s annual base salary is $200,000,
    Mr.&#160;Lowrey&#146;s annual base salary is $320,000,
    Mr.&#160;Chalmers&#146; annual base salary is $125,000,
    Mr.&#160;Muzzo&#146;s annual base salary is $125,000 and
    Ms.&#160;Huston&#146;s base salary is $155,000. Pursuant to the
    terms of each of their new employment agreements entered into in
    August 2009, Mr.&#160;McEwen&#146;s annual base salary is
    $328,000 and Mr.&#160;Walburg&#146;s annual base salary is
    $275,000. The board of managers of Archipelago Learning
    Holdings, LLC may, in its sole discretion, make any increase in
    any of Messrs.&#160;McEwen&#146;s, Walburg&#146;s,
    Lowrey&#146;s, Chalmers&#146;s or Muzzo&#146;s or Ms.
    Huston&#146;s annual base salary, as it deems appropriate. The
    board of managers of Archipelago Learning Holdings, LLC approved
    increases in base salaries for Messrs.&#160;McEwen, Walburg,
    Chalmers and Muzzo for 2008, for which their base salaries were
    $259,875, $215,000, $131,250 and $131,250, respectively. The
    board of managers of Archipelago Learning Holdings, LLC also
    approved increases in each of Messrs.&#160;McEwen&#146;s and
    Walburg&#146;s base salaries for 2009, for which their base
    salaries are $300,000 and $255,000, respectively. In addition,
    under the terms of Mr. McEwen&#146;s previous employment
    agreement, but not his new employment agreement, the board of
    managers of Archipelago Learning Holdings, LLC may consider in
    good faith an appropriate adjustment to Mr.&#160;McEwen&#146;s
    annual base salary if our Adjusted EBITDA, as determined based
    on the provisions of our credit facility as of the end of any
    fiscal year, exceeds $25.0&#160;million. In addition, each of
    Messrs.&#160;Chalmers and Muzzo agreed that as a result of their
    reducing their working hours and taking an extended leave of
    absence beginning in or around June 2009 and ending in or around
    October 2009, as of January&#160;10, 2009 each of their base
    salaries beginning would be $62,500, the total number of each of
    their vested Class&#160;B shares would be 365,150.4&#160;shares
    and the total number of each of their unvested Class&#160;B
    shares would be reduced by 273,862.8&#160;shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of Messrs.&#160;McEwen, Walburg and Lowrey are eligible to
    receive an annual performance bonus of up to 40% of his base
    salary based on performance targets established by the board of
    managers of Archipelago Learning Holdings, LLC in any particular
    fiscal year, and if such performance targets are exceeded in any
    fiscal year, the maximum bonus that each of Messrs.&#160;McEwen,
    Walburg and Lowrey are eligible to receive will be an amount
    equal to 50% of his base salary. Each of Messrs.&#160;Chalmers
    and Muzzo are eligible to receive an annual performance bonus in
    an amount equal to up to two-thirds of his base salary based on,
    among other things, performance targets established by the board
    of managers of Archipelago Learning Holdings, LLC. Ms. Huston
    and each of Messrs. McEwen and Walburg under the terms of their
    new employment agreements are eligible to receive an annual
    performance of up to 50% of his or her base salary based on
    performance targets established by our board of directors in any
    particular fiscal year; and if such performance targets are
    exceeded in any fiscal year the maximum bonus he or she is
    eligible to receive is 60% of his or her base salary. In
    addition, in 2008, Mr.&#160;Lowrey was eligible for an
    additional bonus payment of $55,000 upon achieving certain
    objectives between September&#160;29, 2008, the day he commenced
    his employment with us, and December&#160;31, 2008.
    Mr.&#160;Lowrey also received a signing bonus of $150,000, of
    which $75,000 was paid in the first payroll period after his
    start date and the remainder of which was paid in
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the first payroll period in January 2009. If
    Mr.&#160;Lowrey&#146;s employment is terminated for any reason
    prior to September&#160;29, 2009, he is required to repay us the
    full $150,000. If his employment is terminated for any reason on
    or after September&#160;29, 2009 but on or before
    September&#160;29, 2010, he is required to repay us $75,000 of
    this signing bonus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The employment agreements for each of Messrs.&#160;McEwen,
    Walburg, Lowrey, Chalmers and Muzzo and Ms. Huston provide that
    they are eligible to participate in our 2007 Equity Compensation
    Plan. Mr.&#160;McEwen received 2,434,335 Class&#160;B shares and
    2,434,335 Class&#160;C shares and Mr.&#160;Walburg received
    395,579 Class&#160;B Shares and 395,579 Class&#160;C shares in
    connection with their employment agreements. Mr.&#160;Lowrey
    received 552,875 Class&#160;B shares and 552,875 Class&#160;C
    shares, which represented an increase in the amounts set forth
    in his employment agreement as a result of an updated valuation
    of the shares approved by the board of managers of Archipelago
    Learning Holdings, LLC. Each of Messrs.&#160;Chalmers and Muzzo
    received 912,876 Class&#160;B shares and 912,876 Class&#160;C
    shares in connection with their employment agreements. In
    connection with the agreements relating to their leave of
    absence, Messrs.&#160;Chalmers and Muzzo each forfeited 273,638
    unvested Class&#160;B shares and retained 639,014 Class&#160;B
    shares and 912,876 Class&#160;C shares. For a description of the
    equity participation shares and vesting schedules see
    &#147;Certain Relationships and Related Person
    Transactions&#160;&#151; Participation Shares.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Messrs.&#160;McEwen, Walburg, Lowrey, Chalmers and Muzzo and Ms.
    Huston are entitled to certain benefits if their employment is
    terminated or upon other events. See &#147;&#151; Potential
    Payments Upon Termination Upon Change in Control.&#148; In
    addition, in connection with Messrs.&#160;Chalmers&#146; and
    Muzzo&#146;s scheduled leave of absence, each of them may be
    terminated for cause if such leave of absence exceeds
    120&#160;days.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Non-Competition
    and Non-Solicitation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The employment agreements for Messrs.&#160;McEwen, Walburg,
    Lowrey, Chalmers and Muzzo or Ms.&#160;Huston contain provisions
    relating to non-competition and non-solicitation. Pursuant to
    each of his or her employment agreements (including Messrs.
    McEwen&#146;s and Walburg&#146;s new employment agreements),
    each of Messrs.&#160;McEwen and Lowrey has agreed not to compete
    with us or solicit any of our employees for a period following
    one year of his termination, each of Mr.&#160;Walburg and Ms.
    Huston has agreed not to compete with us or solicit any of our
    employees for a period following six months of his or her
    termination, and each of Messrs.&#160;Chalmers and Muzzo has
    agreed not to compete with us or solicit any of our employees
    for a period following two years of his termination.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">2009
    Omnibus Incentive Plan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to adopt our 2009 Omnibus Incentive Plan, or the 2009
    Plan, in connection with this offering. The 2009 Plan will
    become effective prior to the consummation of this offering and
    a total
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock will be reserved for sale. The 2009 Plan
    provides for grants of nonqualified stock options, incentive
    stock options, stock appreciation rights, restricted stock,
    other stock-based awards and performance-based compensation.
    Directors, officers and other employees of us and our
    subsidiaries, as well as other individuals performing services
    for us, will be eligible for grants under the 2009 Plan. The
    purpose of the 2009 Plan is to provide incentives that will
    attract, retain and motivate highly competent officers,
    directors, employees and other service providers by providing
    them with appropriate incentives and rewards either through a
    proprietary interest in our long-term success or compensation
    based on their performance in fulfilling their personal
    responsibilities. The following is a summary of the material
    terms of the 2009 Plan, but does not include all of the
    provisions of the 2009 Plan. For further information about the
    2009 Plan, we refer you to the complete copy of the 2009 Plan,
    which we will file as an exhibit to the registration statement
    of which this prospectus is a part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Administration</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Plan provides for its administration by the
    compensation committee of our board of directors or any
    committee designated by our board of directors to administer the
    2009 Plan. The committee is empowered to determine the form,
    amount and other terms and conditions of awards, clarify,
    construe or
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    resolve any ambiguity in any provision of the 2009 Plan or any
    award agreement and adopt such rules, forms, instruments and
    guidelines for administering the 2009 Plan as it deems necessary
    or proper. All actions, interpretations and determinations by
    the committee or by our board of directors are final and binding.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Shares
    Available</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Plan makes available an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock, subject to adjustments. In the event that
    any outstanding award expires, is forfeited, cancelled or
    otherwise terminated without the issuance of shares or is
    otherwise settled for cash, shares of our common stock allocable
    to such award, to the extent of such forfeiture, cancellation,
    expiration, termination or settlement for cash, shall again be
    available for the purposes of the 2009 Plan. If any award is
    exercised by tendering shares of our common stock to us, either
    as full or partial payment, in connection with the exercise of
    such award under the 2009 Plan or to satisfy our withholding
    obligation with respect to an award, only the number of shares
    of our common stock issued net of such shares tendered will be
    deemed delivered for purposes of determining the maximum number
    of shares of our common stock then available for delivery under
    the 2009 Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Eligibility
    for Participation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Members of our board of directors, as well as employees of, and
    service providers to, us or any of our subsidiaries and
    affiliates are eligible to participate in the 2009 Plan. The
    selection of participants is within the sole discretion of the
    committee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Types
    of Awards</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Plan provides for the grant of nonqualified stock
    options, incentive stock options, stock appreciation rights,
    shares of restricted stock, or &#147;restricted stock,&#148;
    other stock-based awards and performance-based compensation,
    collectively, the &#147;awards.&#148; The committee will, with
    regard to each award, determine the terms and conditions of the
    award, including the number of shares subject to the award, the
    vesting terms of the award, and the purchase price for the
    award. Awards may be made in assumption of or in substitution
    for outstanding awards previously granted by us or our
    affiliates, or a company acquired by us or with which we combine.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Award
    Agreement</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Awards granted under the 2009 Plan shall be evidenced by award
    agreements (which need not be identical) that provide additional
    terms and conditions associated with such awards, as determined
    by the committee in its sole discretion; provided, however, that
    in the event of any conflict between the provisions of the 2009
    Plan and any such award agreement, the provisions of the 2009
    Plan shall prevail.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Options</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An option granted under the 2009 Plan will permit a participant
    to purchase from us a stated number of shares at an option price
    established by the committee, subject to the terms and
    conditions described in the 2009 Plan, and such additional terms
    and conditions, as established by the committee, in its sole
    discretion, that are consistent with the provisions of the 2009
    Plan. Options shall be designated as either a nonqualified stock
    option or an incentive stock option, provided that options
    granted to non-employee directors and other non-employee service
    providers shall be nonqualified stock options. An option granted
    as an incentive stock option shall, to the extent it fails to
    qualify as an incentive stock option, be treated as a
    nonqualified option. None of us, including any of our affiliates
    or the committee, shall be liable to any participant or to any
    other person if it is determined that an option intended to be
    an incentive stock option does not qualify as an incentive stock
    option. Each option shall conform to the requirements of the
    2009 Plan, and may contain such other provisions as the
    committee shall deem advisable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exercise price of an option granted under the 2009 Plan may
    not be less than 100% of the fair market value of a share of our
    common stock on the date of grant, provided the exercise price
    of an incentive stock option granted to a person holding greater
    than 10% of our voting power may not be less than 110% of
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    such fair market value on such date. The committee will
    determine the term of each option at the time of grant in its
    discretion; however, the term may not exceed ten years (or, in
    the case of an incentive stock option granted to a ten percent
    stockholder, five years).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Stock
    Appreciation Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A stock appreciation right entitles the holder to receive, upon
    its exercise, the excess of the fair market value of a specified
    number of shares of our common stock on the date of exercise
    over the grant price of the stock appreciation right. The
    payment of the value may be in the form of cash, shares of our
    common stock, other property or any combination thereof, as the
    committee determines in its sole discretion. Subject to the
    terms of the 2009 Plan and any applicable award agreement, the
    grant price (which shall not be less than 100% of the fair
    market value of a share of our common stock on the date of
    grant), term, methods of exercise, methods of settlement, and
    any other terms and conditions of any stock appreciation right
    shall be determined by the committee. The term of a stock
    appreciation right may not exceed 10&#160;years.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Restricted
    Stock</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An award of restricted stock is a grant of a specified number of
    shares of our common stock, which are subject to forfeiture upon
    the occurrence of specified events. Each award agreement
    evidencing a restricted stock grant shall specify the period(s)
    of restriction, the number of shares of restricted stock subject
    to the award, the performance, employment or other conditions
    (including the termination of a participant&#146;s service
    whether due to death, disability or other cause) under which the
    restricted stock may be forfeited to the company and such other
    provisions as the committee shall determine. The committee may
    require that the stock certificates evidencing such shares be
    held in custody or bear restrictive legends until the
    restrictions thereon shall have lapsed. Unless otherwise
    determined by the committee and set forth in the award
    agreement, a participant holding restricted stock will not have
    the right to vote and will not receive dividends with respect to
    such restricted stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Stock-Based Awards</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The committee, in its sole discretion, may grant awards of
    shares of our common stock and awards that are valued, in whole
    or in part, by reference to, or are otherwise based on the fair
    market value of, such shares (the &#147;other stock-based
    awards&#148;). Such other stock-based awards shall be in such
    form, and dependent on such conditions, as the committee shall
    determine, including, without limitation, the right to receive
    one or more shares of our common stock (or the equivalent cash
    value of such stock) upon the completion of a specified period
    of service, the occurrence of an event
    <FONT style="white-space: nowrap">and/or</FONT> the
    attainment of performance objectives. Subject to the provisions
    of the 2009 Plan, the committee shall determine to whom and when
    other stock-based awards will be made, the number of shares of
    our common stock to be awarded under (or otherwise related to)
    such other stock-based awards, whether such other stock-based
    awards shall be settled in cash, shares of our common stock or a
    combination of cash and such shares, and all other terms and
    conditions of such awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Performance-Based
    Compensation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the extent permitted by Section&#160;162(m) of the Internal
    Revenue Code, or the Code, the committee is authorized to design
    any award so that the amounts or shares payable and
    distributable thereunder are treated as &#147;qualified
    performance-based compensation&#148; within the meaning of
    Section&#160;162(m) of the Code. The vesting, crediting
    <FONT style="white-space: nowrap">and/or</FONT>
    payment of performance-based compensation shall be based on the
    achievement of objective performance goals based on one or more
    of the following measures: (a)&#160;consolidated earnings before
    or after taxes (including earnings before interest, taxes,
    depreciation and amortization); (b)&#160;net income;
    (c)&#160;operating income; (d)&#160;earnings per share;
    (e)&#160;book value per share; (f)&#160;return on
    shareholders&#146; equity; (g)&#160;expense management;
    (h)&#160;return on investment; (i)&#160;improvements in capital
    structure; (j)&#160;profitability of an identifiable business
    unit or product; (k)&#160;maintenance or improvement of profit
    margins; (l)&#160;stock price; (m)&#160;market share;
    (n)&#160;revenues or sales; (o)&#160;costs; (p)&#160;cash flow;
    (q)&#160;working capital; and (r)&#160;return on assets. Such
    measures may be used to measure our performance or the
    performance of any of our business units and
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    may be used to compare our performance against the performance
    of a group of comparable companies, or a published index.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Transferability</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise determined by the committee, an award shall not
    be transferable or assignable by a participant except in the
    event of his or her death (subject to the applicable laws of
    descent and distribution) and any such purported assignment,
    alienation, pledge, attachment, sale, transfer or encumbrance
    shall be void and unenforceable against us or any of our
    subsidiaries or affiliates. Any permitted transfer of the awards
    to heirs or legatees of a participant shall not be effective to
    bind us unless the committee has been furnished with written
    notice thereof and a copy of such evidence as the committee may
    deem necessary to establish the validity of the transfer and the
    acceptance by the transferee or transferees of the terms and
    conditions of the 2009 Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Stockholder
    Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as otherwise provided in the applicable award agreement,
    a participant has no rights as a stockholder with respect to
    shares of our common stock covered by any award until the
    participant becomes the record holder of such shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Adjustment
    of Awards</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of any corporate event or transaction such as a
    merger, consolidation, reorganization, recapitalization,
    separation, stock dividend, stock split, reverse stock split,
    split up, spin-off, combination of shares of our common stock,
    exchange of shares of our common stock, dividend in kind,
    extraordinary cash dividend, or other like change in capital
    structure (other than normal cash dividends) to our
    stockholders, or any similar corporate event or transaction, the
    committee, to prevent dilution or enlargement of
    participants&#146; rights under the 2009 Plan, shall substitute
    or adjust, in its sole discretion, the number and kind of shares
    that may be issued under the 2009 Plan or under particular forms
    of awards, the number and kind of shares subject to outstanding
    awards, the option price, grant price or purchase price
    applicable to outstanding awards, the annual award limits,
    <FONT style="white-space: nowrap">and/or</FONT> other
    value determinations applicable to the 2009 Plan or outstanding
    awards.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the occurrence of a change in control, unless otherwise
    specifically prohibited under applicable laws or by the rules
    and regulations of any governing governmental agencies or
    national securities exchanges, or unless the committee shall
    determine otherwise in the award agreement, the committee is
    authorized (but not obligated) to make adjustments in the terms
    and conditions of outstanding awards, including without
    limitation the following (or any combination thereof):
    (i)&#160;continuation or assumption of such outstanding awards
    under the 2009 Plan by us (if it is the surviving company or
    corporation) or by the surviving company or corporation or its
    parent; (ii)&#160;substitution by the surviving company or
    corporation or its parent of awards with substantially the same
    terms for such outstanding awards; (iii)&#160;accelerated
    exercisability, vesting
    <FONT style="white-space: nowrap">and/or</FONT> lapse
    of restrictions under all then outstanding awards immediately
    prior to the occurrence of such event; (iv)&#160;upon written
    notice, provide that any outstanding awards must be exercised,
    to the extent then exercisable, within fifteen days immediately
    prior to the scheduled consummation of the event, or such other
    period as determined by the committee (in either case contingent
    upon the consummation of the event), and at the end of such
    period, such awards shall terminate to the extent not so
    exercised within the relevant period; and (v)&#160;cancellation
    of all or any portion of outstanding awards for fair value (as
    determined in the sole discretion of the committee) which, in
    the case of options and stock appreciation rights, may equal the
    excess, if any, of the value of the consideration to be paid in
    the change of control transaction to holders of the same number
    of shares subject to such options or stock appreciation rights
    (or, if no such consideration is paid, fair market value of the
    shares subject to such outstanding awards or portion thereof
    being canceled) over the aggregate option price or grant price,
    as applicable, with respect to such awards or portion thereof
    being canceled.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    98
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Amendment
    and Termination</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors may amend, alter, suspend, discontinue,
    or terminate the 2009 Plan or any portion thereof or any award
    (or award agreement) thereunder at any time.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Compliance
    with Code Section&#160;409A</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the extent that the 2009 Plan
    <FONT style="white-space: nowrap">and/or</FONT>
    awards are subject to Section&#160;409A of the
    U.S.&#160;Internal Revenue Code, or the Code, the committee may,
    in its sole discretion and without a participant&#146;s prior
    consent, amend the 2009 Plan
    <FONT style="white-space: nowrap">and/or</FONT>
    awards, adopt policies and procedures, or take any other actions
    (including amendments, policies, procedures and actions with
    retroactive effect) as are necessary or appropriate to
    (a)&#160;exempt the 2009 Plan
    <FONT style="white-space: nowrap">and/or</FONT> any
    award from the application of Section&#160;409A of the Code,
    (b)&#160;preserve the intended tax treatment of any such award,
    or (c)&#160;comply with the requirements of Section&#160;409A of
    the Code, Department of Treasury regulations and other
    interpretive guidance issued thereunder, including without
    limitation any such regulations or other guidance that may be
    issued after the date of the grant. This plan shall be
    interpreted at all times in such a manner that the terms and
    provisions of the 2009 Plan and awards are exempt from or comply
    with Section&#160;409A guidance.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    99
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='116'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    RELATIONSHIPS AND RELATED PERSON TRANSACTIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Holdings
    LLC Agreement</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On June&#160;30, 2008, investment funds affiliated with
    Providence Equity Partners, together with Cameron Chalmers and
    David Muzzo (our founders and vice presidents) MHT-SI, L.P. and
    Jeanne Bodnar, the founder of TeacherWeb, together constituting
    all of the members of Archipelago Learning Holdings, LLC
    (formerly known as Study Island Holdings, LLC), entered into a
    second amended and restated limited liability company agreement,
    or the Holdings LLC Agreement, which governs its operations.
    Immediately prior to the consummation of this offering,
    Archipelago Learning, Inc., a newly formed Delaware corporation,
    will consummate the Corporate Reorganization whereby Archipelago
    Learning Holdings, LLC will become a wholly owned subsidiary of
    Archipelago Learning, Inc. The Holdings LLC Agreement in an
    amended form will continue to govern the operations of
    Archipelago Learning Holdings, LLC. See &#147;Corporate
    Reorganization.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC created a board of managers
    of seven persons to manage the company and its business affairs.
    Of the seven managers, four are appointed by Providence Equity
    Partners, two are our founders, Cameron Chalmers and David
    Muzzo, and one is the current chief executive officer, Tim
    McEwen.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Holdings LLC Agreement sets forth the rights of the
    Class&#160;A,
    <FONT style="white-space: nowrap">A-2,</FONT> B and C
    shareholders and the vesting and forfeiture provisions of the
    Class&#160;B and C shares. Holders of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    vote as a single class, with each holder of Class&#160;A or
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    entitled to one vote per share that it owns. Holders of
    Class&#160;B and Class&#160;C shares are not entitled to vote
    their shares. The Class&#160;B shares of Archipelago Learning
    Holdings, LLC vest ratably over five years. Holders of
    Class&#160;C shares are entitled to distributions after holders
    of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    receive certain threshold multiples of cash-based returns on
    their respective Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares,</FONT>
    subject to such Class&#160;C share holders&#146; continued
    employment by us. Both of the Class&#160;B and Class&#160;C
    shares are granted under an equity incentive plan. For a more
    detailed description of the Class&#160;B and Class&#160;C
    shares, see &#147;&#151;&#160;Participation Shares.&#148; The
    Class&#160;A,
    <FONT style="white-space: nowrap">A-2,</FONT> B, and
    C shares will be exchanged for shares of the common stock,
    shares of restricted common stock and restricted stock unit
    awards of Archipelago Learning, Inc. in connection with the
    Corporate Reorganization. See &#147;Corporate
    Reorganization.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC may make distributions to its
    members in accordance with the terms of the Holdings LLC
    Agreement in the sole discretion of the board of managers. For a
    description of distributions made, see
    &#147;&#151;&#160;Archipelago Learning Holdings LLC
    Distributions.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Holdings LLC Agreement includes indemnification provisions
    by Archipelago Learning Holdings, LLC in favor of the board of
    managers, each current and former manager and any of their
    respective affiliates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Archipelago
    Learning Holdings, LLC Distributions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC paid aggregate distributions
    to its equity holders of $74.8&#160;million and
    $0.8&#160;million in the year end December&#160;31, 2007 and the
    six months ended June&#160;30, 2009, respectively. These
    distributions were made in connection with the Providence Equity
    Transactions and to enable equity holders to meet their
    estimated tax obligations, and they include a $73.2&#160;million
    distribution made in November 2007 with the proceeds of the term
    loan and cash on hand. See &#147;Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations.&#148; The board of managers of Archipelago Learning
    Holdings, LLC approved a special distribution of approximately
    $8.0&#160;million to its equity holders to be made in the third
    quarter of 2009. In addition, Archipelago Learning Holdings, LLC
    intends to make a distribution of approximately
    $1.4&#160;million to its equity holders to enable them to meet
    their estimated tax obligations for the period from
    January&#160;1, 2009 to the date of the Corporate
    Reorganization. The amount of this distribution will be based on
    Archipelago Learning Holdings, LLC&#146;s estimated net taxable
    income from January&#160;1, 2009 to the date of the Corporate
    Reorganization. Investors in this offering will not receive this
    distribution.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    100
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Participation
    Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with the Providence Equity Transactions, we
    adopted the 2007 Equity Incentive Plan, under which we granted
    Class&#160;B and Class&#160;C shares of Archipelago Learning
    Holdings, LLC to our executive officers and certain of our
    employees as equity incentive compensation. The Class&#160;B and
    Class&#160;C shares are awarded under the plan without any
    up-front cost to a participant through a participation
    agreement. The Class&#160;B shares are time-vesting shares that
    vest ratably over five years subject to a participant&#146;s
    continued employment with or service to the company. Holders of
    Class&#160;C shares are entitled to distributions after holders
    of Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    receive certain threshold multiples of cash-based returns on
    their respective Class&#160;A and Class&#160;A-2 shares, subject
    to such Class&#160;C share holders&#146; continued employment by
    or service to us. All Class&#160;C shares and any unvested
    Class&#160;B shares will be forfeited if any participant is no
    longer our employee. All Class&#160;B and Class&#160;C shares
    will be forfeited if the participant&#146;s employment is
    terminated by us for cause or by the participant without good
    reason. In addition, all Class&#160;B shares and Class&#160;C
    shares will be forfeited upon a holder&#146;s breach of any
    covenants relating to non-competition, non-solicitation or
    non-disclosure in any agreement. Furthermore, upon the sale of
    more than 80% of the voting securities of Archipelago Learning
    Holdings, LLC or upon the sale of all or substantially all of
    the assets of Archipelago Learning Holdings, LLC, holders of
    unvested Class&#160;B shares will fully vest to the extent that
    his or her employment is not terminated prior to such sale or
    his or her employment with us is terminated other than for cause
    within 60&#160;days prior to the execution of definitive and
    final agreements with respect to such sale.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the consummation with this offering and in connection with
    the Corporate Reorganization, holders of the Class&#160;B and
    Class&#160;C shares will receive common stock, restricted stock
    and restricted stock unit awards in exchange for their
    Class&#160;B and Class&#160;C shares. See &#147;Corporate
    Reorganization.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the number and class of shares of
    Archipelago Learning Holdings, LLC received by each named
    executive officer as of September&#160;2, 2009 and the number of
    shares of common stock, restricted common stock and restricted
    stock unit awards for which they will exchange their shares of
    Archipelago Learning Holdings, LLC in connection with the
    Corporate Reorganization:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="24%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="13%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="14%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of Shares of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>of Restricted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of Restricted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Class B Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Class C Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Common Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Common Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Unit Awards</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Timothy McEwen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,434,335
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,434,335
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cameron Chalmers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    639,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    912,876
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David Muzzo
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    639,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    912,876
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ray Lowrey
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    552,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    552,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James Walburg
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    486,876
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    486,876
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Julie Huston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    182,576
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    182,576
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stockholders
    Agreement</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the completion of this offering, we intend to enter into a
    stockholders agreement with our existing principal stockholders,
    which include Providence Equity Partners, Cameron Chalmers,
    David Muzzo and MHT-SI, L.P. The stockholders agreement will set
    forth certain terms relating to the rights of our principal
    stockholders and restrictions on transfers of shares of our
    common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Registration
    Rights Agreement</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the completion of this offering and in connection with the
    Corporate Reorganization, we intend to enter into a registration
    rights agreement with our principal shareholders, which include
    Providence Equity Partners, Cameron Chalmers, David Muzzo and
    MHT-SI L.P., providing for customary registration rights,
    including demand, short-form and piggyback registration rights
    of the common stock they will receive as a result of the
    Corporate Reorganization.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    101
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Restricted
    Stock and Restricted Stock Unit Awards</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the Corporate Reorganization, we intend to issue restricted
    common stock and restricted stock unit awards in exchange of the
    unvested Class&#160;B shares and the Class&#160;C shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Corporate
    Reorganization</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, we conducted our business through
    Archipelago Learning Holdings, LLC and its subsidiaries.
    Immediately prior to the consummation of this offering,
    Archipelago Learning, Inc., a newly formed Delaware corporation,
    will directly and indirectly, acquire all of the equity
    interests, of Archipelago Learning Holdings, LLC in exchange for
    shares of common stock and shares of restricted stock of
    Archipelago Learning, Inc. See &#147;Corporate
    Reorganization.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MHT-Securities,
    L.P. Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On May&#160;1, 2007, Archipelago Learning, LLC entered into an
    agreement with MHT Securities, L.P. for the provision of
    financial advice in connection with the identification,
    evaluation and acquisition of one or more businesses. MHT
    Securities, L.P. is an affiliate of MHT-SI, L.P. one of the
    shareholders of Archipelago Learning Holdings, LLC. Under the
    terms of the agreement, Archipelago Learning, LLC must pay a
    transaction fee to MHT Securities, L.P. upon the successful
    consummation of a merger, acquisition, consolidation, divesture
    or similar transaction with any company initially identified and
    contacted by MHT Securities, L.P. as a potential acquisition for
    Archipelago Learning, LLC. The amount of this transaction fee is
    dependent upon the size of the acquisition, but in no
    circumstances less than $250,000. Archipelago Learning, LLC is
    also responsible for reimbursing MHT Securities, L.P. for any
    reasonable expenses incurred in connection with this agreement.
    During 2008, we paid approximately $277,000 to MHT Securities,
    L.P., consisting of $250,000 in connection with our acquisition
    of TeacherWeb, and $27,000 in expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Agreement
    with CDW Corporation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We buy information technology and services from CDW Corporation,
    a portfolio company of Providence Equity Partners, the majority
    shareholder of Archipelago Learning Holdings, LLC. Although we
    do not have any long-term contracts or purchase agreements
    outstanding with CDW, we purchased approximately $344,000 and
    $178,000 of information technology and services from CDW in 2008
    and the six months ended June&#160;30, 2009, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Edline
    Investment</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In August 2009, in conjunction with Providence Equity
    Partner&#146;s acquisition of Edline, a private Chicago-based
    educational technology company, we made a strategic minority
    investment in Edline. We purchased 285,601 Series&#160;A shares
    of Edline for $2.9&#160;million, representing 7.1% of
    Edline&#146;s outstanding Series&#160;A shares. In addition,
    Edline borrowed $2.1&#160;million from us pursuant to a
    five-year promissory note, which bears interest at 9.5% per
    annum and requires semi-annual interest-only payments. In
    connection with these transactions, we received transaction fees
    of $0.2&#160;million. Edline provides online Learning Community
    Management Systems, or LCMS, solutions that help schools improve
    student performance by harnessing the power of parental
    involvement, supporting teachers, and engaging the learning
    community. Services include web hosting, content management,
    information portals, tools for classroom management, gradebook,
    notification, student data analytics, virtual storage and
    related technologies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that we can benefit from strategic opportunities with
    Edline, as Edline is capitalizing on the same trends in the K-12
    education market as Study Island and TeacherWeb: (1)&#160;an
    increased focus on higher academic achievement and
    (2)&#160;increased availability and utilization of web-based
    technologies to enhance and supplement instruction and improve
    school to home communications. Accordingly, there are attractive
    strategic partnership opportunities between Archipelago Learning
    and Edline, including: (1)&#160;linking Study Island&#146;s
    content to Edline&#146;s school and district LCMS solutions;
    (2)&#160;co-marketing arrangements to capitalize on each
    company&#146;s customer base and sales force; and,
    (3)&#160;linking
    <FONT style="white-space: nowrap">and/or</FONT>
    sharing of web application functionality between Edline and
    TeacherWeb.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    102
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon consummation of this offering, directors who are our
    employees or employees of our subsidiaries or employees of
    Providence Equity Partners will receive no compensation for
    their service as members of either our board of directors or
    board committees.
    On&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    our board of directors approved a plan for annual compensation
    for our non-employee directors, effective as of the date of the
    consummation of this offering. The non-employee directors will
    receive an annual retainer of $&#160;&#160;&#160;&#160;&#160;
    and a fee of $&#160;&#160;&#160;&#160;&#160; for each meeting
    they attend. The annual retainer will be payable at the
    director&#146;s option either 100% in cash or 100% in shares of
    our common stock. In addition, our non-employee directors will
    receive an annual restricted share award with a grant date fair
    market value of $&#160;&#160;&#160;&#160;&#160;, which will vest
    on the&#160;&#160;&#160;&#160;&#160;&#160;anniversary of the
    grant date. The non-management chair of the audit committee will
    receive an additional $&#160;&#160;&#160;&#160;&#160;fee payable
    at his or her option either 100% in cash or 100% in shares of
    our common stock. No separate committee meeting fees will be
    paid.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All directors are reimbursed for reasonable travel and lodging
    expenses incurred by them in connection with attending board and
    committee meetings.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into employment agreements with each of
    Messrs.&#160;McEwen, Walburg, Lowrey, Chalmers, Muzzo and
    Ms.&#160;Huston. For more information regarding these
    agreements, see &#147;Compensation Discussion and
    Analysis&#160;&#151; Employment Agreements&#148; and
    &#147;Compensation Discussion and
    Analysis&#160;&#151;&#160;Potential Payments Upon Termination or
    Change of Control.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to enter into indemnification agreements with each of
    our directors and executive officers. These agreements, among
    other things, require us to indemnify each director and
    executive officer to the fullest extent permitted by Delaware
    law, including indemnification of expenses such as
    attorneys&#146; fees, judgments, fines and settlement amounts
    incurred by the director or executive officer in any action or
    proceeding, including any action or proceeding by or in right of
    us, arising out of the person&#146;s services as a director or
    executive officer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Policies
    for Approval of Related Person Transactions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, we will adopt a written policy
    relating to the approval of related person transactions. Our
    audit committee will review and approve or ratify all
    relationships and related person transactions between us and
    (i)&#160;our directors, director nominees, executive officers or
    their immediate family members, (ii)&#160;any 5% record or
    beneficial owner of our common stock or (iii)&#160;any immediate
    family member of any person specified in (i)&#160;and
    (ii)&#160;above. Our controller will be primarily responsible
    for the development and implementation of processes and controls
    to obtain information from our directors and executive officers
    with respect to related party transactions and for determining,
    based on the facts and circumstances, whether we or a related
    person have a direct or indirect material interest in the
    transaction.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As set forth in the related person transaction policy, in the
    course of its review and approval or ratification of a related
    party transaction, the committee will consider:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the nature of the related person&#146;s interest in the
    transaction;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the availability of other sources of comparable products or
    services;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the material terms of the transaction, including, without
    limitation, the amount and type of transaction;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the importance of the transaction to us.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any member of the audit committee who is a related person with
    respect to a transaction under review will not be permitted to
    participate in the discussions or approval or ratification of
    the transaction. However, such member of the audit committee
    will provide all material information concerning the transaction
    to the audit committee.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    103
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='117'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRINCIPAL
    AND SELLING STOCKHOLDERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows information regarding the beneficial
    ownership of our common stock (i)&#160;immediately prior to and
    (ii)&#160;as adjusted to give effect to this offering by:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    each person or group who is known by us to own beneficially more
    than 5% of our common stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    each member of our board of directors and each of our named
    executive officers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    all members of our board of directors and our named executive
    officers as a group;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    each of the selling stockholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For more information on selling stockholders, see &#147;Certain
    Relationships and Related Person Transactions.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Beneficial ownership of shares is determined under rules of the
    SEC and generally includes any shares over which a person
    exercises sole or shared voting or investment power. Except as
    noted by footnote, and subject to community property laws where
    applicable, we believe based on the information provided to us
    that the persons and entities named in the table below have sole
    voting and investment power with respect to all shares of our
    common stock shown as beneficially owned by them. Percentage of
    beneficial ownership is based
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009 after giving effect to our Corporate Reorganization and
    assuming an initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share (the midpoint of the
    price range set forth on the cover of this prospectus), shares
    of common stock to be outstanding after the completion of this
    offering, assuming no exercise of the over-allotment option,
    or&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares,
    assuming full exercise of the over-allotment option. Except as
    otherwise indicated, the persons named in the table below have
    sole voting and investment power with respect to all shares of
    capital stock held by them. Unless otherwise indicated, the
    address for each holder listed below is Archipelago Learning,
    Inc., 3400 Carlisle Street, Suite&#160;345, Dallas, Texas 75204.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
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    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
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    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Shares Beneficially Owned After<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>this Offering<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Assuming Full<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Exercise of the<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>Shares Beneficially Owned<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Shares Beneficially Owned<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Option to Purchase<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Before this Offering</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>After this Offering(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Additional Shares</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Percentage<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name and Address</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Offered(2)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Providence Equity Partners V L.P.(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    MHT-SI L.P.(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Timothy McEwen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    James Walburg
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
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</TD>
<TD nowrap align="left" valign="bottom">
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</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
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</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
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</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
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</TD>
<TD nowrap align="left" valign="bottom">
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</TD>
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</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
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</TD>
<TD>
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</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
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</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Ray Lowrey
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
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</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Julie Huston
</DIV>
</TD>
<TD>
&nbsp;
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<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cameron Chalmers
</DIV>
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<DIV style="text-indent: -9pt; margin-left: 9pt">
    David Muzzo
</DIV>
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<DIV style="text-indent: -9pt; margin-left: 9pt">
    David Phillips(5)
</DIV>
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<DIV style="text-indent: -9pt; margin-left: 9pt">
    Michael Powell
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<TR valign="bottom" style="background: #CCEEFF">
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<DIV style="text-indent: -9pt; margin-left: 9pt">
    Peter Wilde(5)
</DIV>
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<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    All board of director members and named executive officers as a
    group (&#160;&#160;&#160;&#160;&#160;&#160;persons)
</DIV>
</TD>
<TD>
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</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    104
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>footnotes on following page</I>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    *&#160;</TD>
    <TD></TD>
    <TD valign="bottom">
    Represents beneficial ownership less than 1% of our outstanding
    common stock.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Beneficial ownership does not include any shares that may be
    purchased in this offering. See &#147;Underwriting.&#148;</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents the number of shares of common stock of Archipelago
    Learning, Inc. to be offered after giving effect to the
    Corporate Reorganization. If the underwriters exercise their
    option to purchase additional shares of our common stock, the
    additional shares sold by the selling stockholders will be
    allocated as follows:&#160;&#160;&#160;&#160;&#160;.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    The address of Providence Equity Partners V L.P. and Providence
    Equity Partners V-A Study Island, LP is 50 Kennedy Plaza,
    Suite&#160;1801, Providence, Rhode Island, 02903.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    The address of MHT-SI, L.P. is 2000 McKinney Avenue,
    Suite&#160;1200, Dallas, Texas, 75201.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    Does not include shares held by Providence Equity Partners V
    L.P. and its affiliated entities. By virtue of their
    affiliations with Providence Equity Partners, each of
    Messrs.&#160;Phillips and Wilde may be deemed to have or share
    beneficial ownership of shares held by Providence Equity
    Partners V L.P. and its affiliated entities. Each of
    Messrs.&#160;Phillips and Wilde disclaims beneficial ownership
    of such shares, except to the extent of his pecuniary interest
    therein.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    105
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='118'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF CAPITAL STOCK</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a description of the material terms of our
    certificate of incorporation and bylaws as they will be in
    effect following the Corporate Reorganization and immediately
    prior to the consummation of this offering. This summary does
    not purport to be complete and is qualified in its entirety by
    reference to the actual terms and provisions of our certificate
    of incorporation and bylaws, copies of which will be filed as
    exhibits to the registration statement of which this prospectus
    is a part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Authorized
    Capitalization</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the completion of the Corporate Reorganization immediately
    prior to the consummation of this offering, our authorized
    capital stock will consist
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock, par value $0.001 per share,
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of preferred stock, par value $&#160;&#160;&#160;&#160;&#160;
    per share. Immediately following the completion of this
    offering,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock,
    or&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    if the underwriters exercise their option to purchase additional
    shares in full, will be outstanding, and there will be no
    outstanding shares of preferred stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The holders of our common stock are entitled to the following
    rights.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Voting
    Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each share of common stock entitles the holder to one vote with
    respect to each matter presented to our stockholders on which
    the holders of common stock are entitled to vote. Our common
    stock votes as a single class on all matters relating to the
    election and removal of directors on our board of directors and
    as provided by law, with each share of common stock entitling
    its holder to one vote. Holders of our common stock will not
    have cumulative voting rights. Except as otherwise provided in
    our certificate of incorporation or required by law, all matters
    to be voted on by our stockholders must be approved by a
    majority of the shares present in person or by proxy at the
    meeting and entitled to vote on the subject matter.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Dividend
    Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of common stock will share equally in any dividend
    declared by our board of directors, subject to any preferential
    rights of the holders of any outstanding preferred stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Liquidation
    Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of any voluntary or involuntary liquidation,
    dissolution or winding up of our affairs, holders of our common
    stock would be entitled to share ratably in our assets that are
    legally available for distribution to stockholders after payment
    of liabilities. If we have any preferred stock outstanding at
    such time, holders of the preferred stock may be entitled to
    distribution
    <FONT style="white-space: nowrap">and/or</FONT>
    liquidation preferences. In either such case, we must pay the
    applicable distribution to the holders of our preferred stock
    before we may pay distributions to the holders of our common
    stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our stockholders have no subscription, redemption or conversion
    privileges. Our common stock does not entitle its holders to
    preemptive rights for additional shares and does not have any
    sinking fund provisions. All of the outstanding shares of our
    common stock are fully paid and nonassessable. The rights,
    preferences and privileges of the holders of our common stock
    are subject to the rights of the holders of shares of any series
    of preferred stock which we may issue.
</DIV>

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    <BR>
    106
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Registration
    Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our existing shareholders have certain registration rights with
    respect to our common stock pursuant to a registration rights
    agreement. For further information regarding this agreement, see
    &#147;Certain Relationships and Related Person
    Transactions&#148; and &#147;Shares Eligible for Future
    Sale.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Preferred
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors is authorized to provide for the issuance
    of preferred stock in one or more series and to fix the
    preferences, powers and relative, participating, optional or
    other special rights, and qualifications, limitations or
    restrictions thereof, including the dividend rate, conversion
    rights, voting rights, redemption rights and liquidation
    preference and to fix the number of shares to be included in any
    such series without any further vote or action by our
    stockholders. Any preferred stock so issued may rank senior to
    our common stock with respect to the payment of dividends or
    amounts upon liquidation, dissolution or winding up, or both. In
    addition, any such shares of preferred stock may have class or
    series voting rights. The issuance of preferred stock may have
    the effect of delaying, deferring or preventing a change in
    control of our company without further action by the
    shareholders and may adversely affect the voting and other
    rights of the holders of our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Anti-Takeover
    Effects of the Delaware General Corporate Law and Our
    Certificate of Incorporation and Bylaws</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, our certificate of
    incorporation and bylaws will contain provisions that may delay,
    defer or discourage another party from acquiring control of us.
    We expect that these provisions, which are summarized below,
    will discourage coercive takeover practices or inadequate
    takeover bids. These provisions are also designed to encourage
    persons seeking to acquire control of us to first negotiate with
    our board of directors, which we believe may result in an
    improvement of the terms of any such acquisition in favor of our
    stockholders. However, they also give our board the power to
    discourage acquisitions that some stockholders may favor.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Section&#160;203
    of the Delaware General Corporate Law</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, we will be subject to the
    provisions of Section&#160;203 of the Delaware General
    Corporation Law. In general, Section&#160;203 prohibits a
    publicly held Delaware corporation from engaging in a
    &#147;business combination&#148; with an &#147;interested
    stockholder&#148; for a three-year period following the time
    that this stockholder becomes an interested stockholder, unless
    the business combination is approved in a prescribed manner. A
    &#147;business combination&#148; includes, among other things, a
    merger, asset or stock sale or other transaction resulting in a
    financial benefit to the interested stockholder. An
    &#147;interested stockholder&#148; is a person who owns 15% or
    more of the corporation&#146;s outstanding stock, or an
    affiliate or associate of the corporation who did own 15% or
    more of the corporation&#146;s voting stock within three years
    prior to the determination of interested stockholder status.
    Under Section&#160;203, a business combination between a
    corporation and an interested stockholder is prohibited unless
    it satisfies one of the following conditions:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    before the stockholder became interested, the board of directors
    approved either the business combination or the transaction that
    resulted in the stockholder becoming an interested stockholder;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    upon consummation of the transaction which resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding for purposes of determining the voting stock
    outstanding, shares owned by persons who are directors and also
    officers, and employee stock plans, in some instances;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    at or after the time the stockholder became interested, the
    business combination was approved by the board of directors of
    the corporation and authorized at an annual or special meeting
    of
</TD>
</TR>

</TABLE>

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    <BR>
    107
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    the stockholders by the affirmative vote of at least two-thirds
    of the outstanding voting stock which is not owned by the
    interested stockholder.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A Delaware corporation may opt out of Section&#160;203 either
    with an express provision in its original certificate of
    incorporation or in an amendment to its certificate of
    incorporation or bylaws approved by its stockholders. However,
    we have not opted out, and do not currently intend to opt out,
    of this provision. The statute could prohibit or delay mergers
    or other takeover or change in control attempts and,
    accordingly, may discourage attempts to acquire us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Certificate
    of Incorporation and Bylaw Provisions</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Board Composition and Filling Vacancies.</I>&#160;&#160;Our
    bylaws will provide that directors may be removed only for cause
    by the affirmative vote of the holders of a majority of the
    voting power of the outstanding shares of common stock entitled
    to vote. Furthermore, any vacancy on our board of directors,
    however occurring, including a vacancy resulting from an
    increase in the size of our board, may only be filled by the
    affirmative vote of a majority of our directors then in office
    even if less than a quorum.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>No Stockholder Action by Written Consent.</I>&#160;&#160;Our
    certificate of incorporation will provide that, subject to the
    rights of any holders of preferred stock to act by written
    consent instead of a meeting, stockholder action may be taken
    only at an annual meeting or special meeting of stockholders and
    may not be taken by written consent instead of a meeting, unless
    the action to be taken by written consent of stockholders and
    the taking of this action by written consent has been expressly
    approved in advance by the board of directors. Failure to
    satisfy any of the requirements for a stockholder meeting could
    delay, prevent or invalidate stockholder action.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Meetings of Stockholders</I>.&#160;&#160;Our bylaws will
    provide that only a majority of the members of our board of
    directors then in office or the Chief Executive Officer may call
    special meetings of the stockholders and only those matters set
    forth in the notice of the special meeting may be considered or
    acted upon at a special meeting of stockholders. Our bylaws will
    limit the business that may be conducted at an annual meeting of
    stockholders to those matters properly brought before the
    meeting.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Advance Notice Requirements.</I>&#160;&#160;Our bylaws will
    establish an advance notice procedure for stockholders to make
    nominations of candidates for election as directors or to bring
    other business before an annual meeting of our stockholders. The
    bylaws will provide that any stockholder wishing to nominate
    persons for election as directors at, or bring other business
    before, an annual meeting must deliver to our secretary a
    written notice of the stockholder&#146;s intention to do so. To
    be timely, the stockholder&#146;s notice must be delivered to or
    mailed and received by us not later than the 60th&#160;day nor
    earlier than the 90th&#160;day prior to the anniversary date of
    the preceding annual meeting, except that if the annual meeting
    is changed by more than 30&#160;days from the date contemplated
    at the time of the previous year&#146;s proxy statement, we must
    receive the notice not earlier than the 90th&#160;day prior to
    such annual meeting and not later than the 60th&#160;day prior
    to such annual meeting. If a public announcement of the date of
    such annual meeting is made fewer than 70&#160;days prior to the
    date of such annual meeting, then notice must be received by us
    no later than the tenth day following the public announcement of
    the date of the meeting. The notice must include the information
    specified in the bylaws.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment to Bylaws and Certificate of
    Incorporation.</I>&#160;&#160;As required by Delaware law, any
    amendment to our certificate of incorporation must first be
    approved by a majority of our board of directors and, if
    required by law or our certificate of incorporation, thereafter
    be approved by a majority of the outstanding shares entitled to
    vote on the amendment. Our bylaws may be amended by the
    affirmative vote of a majority of the directors then in office,
    subject to any limitations set forth in the bylaws, without
    further stockholder action.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Blank Check Preferred Stock.</I>&#160;&#160;The board of
    directors may authorize the issuance of preferred stock with
    voting or conversion rights that could adversely affect the
    voting power or other rights of the holders of the common stock.
    Issuing preferred stock provides flexibility in connection with
    possible acquisitions and other corporate purposes, but could
    also, among other things, have the effect of delaying, deferring
    or
</DIV>

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    <BR>
    108
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    preventing a change in control of our company and may adversely
    affect the market price of our common stock and the voting and
    other rights of the holders of common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Listing</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to apply to have our common stock listed on the NYSE
    or Nasdaq under the symbol &#147;ARCL.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer
    Agent and Registrar</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The transfer agent and registrar for our common stock
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    109
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='119'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF MATERIAL INDEBTEDNESS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On November&#160;16, 2007, Archipelago Learning, LLC, formerly
    known as Study Island, LLC, as borrower, and the other persons
    designated as credit parties from time to time, entered into a
    credit facility providing for a $70.0&#160;million term loan and
    a $10.0&#160;million revolving credit facility with General
    Electric Capital Corporation, as a lender and as agent for all
    lenders, NewStar Financial, Inc., as syndication agent, the
    other parties thereto as lenders and GE Capital Markets, Inc.
    and NewStar Financial, Inc., as joint lead arrangers and joint
    bookrunners. This summary is not a complete description of all
    of the terms of the agreements governing our credit facility.
    The agreements setting forth the principal terms and conditions
    of our credit facility are filed as exhibits to the registration
    statement of which this prospectus forms a part.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009 the credit agreement governing the credit facility
    was amended to permit the creation of AL&#160;Midco, LLC, or
    AL&#160;Midco, a new wholly owned subsidiary of Archipelago
    Learning Holdings, LLC, which assumed all of Archipelago
    Learning Holdings, LLC&#146;s interests in Archipelago Learning,
    LLC. AL&#160;Midco became a guarantor under the credit agreement
    and Archipelago Learning Holdings, LLC was released as guarantor.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">General</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our credit facility consists of a $70.0&#160;million term loan
    (of which $68.4&#160;million was outstanding as of June&#160;30,
    2009), which expires in November 2013, and a $10.0&#160;million
    revolving credit facility, none of which was outstanding at
    June&#160;30, 2009, which expires in November 2013.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The obligations under the credit facility are guaranteed by
    AL&#160;Midco and TeacherWeb. The credit facility is secured on
    a first-priority basis by security interests (subject to
    permitted liens) in substantially all tangible and intangible
    assets, subject to certain exceptions, owned by Archipelago
    Learning, LLC, AL&#160;Midco and TeacherWeb, including pledges
    of the stock of Archipelago Learning, LLC&#146;s,
    AL&#160;Midco&#146;s and TeacherWeb&#146;s subsidiaries. In
    addition, any future domestic subsidiaries of Archipelago
    Learning, LLC, AL&#160;Midco and TeacherWeb will be required
    (subject to certain exceptions) to guarantee the credit facility
    and grant liens on substantially all of its assets to secure
    such guarantee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Interest
    and Fees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The term loan bears interest at rates based upon either a base
    rate or LIBOR plus an applicable margin determined based on our
    leverage ratio (3.25% as of June&#160;30, 2009, 3.25% as of
    December&#160;31, 2008, and 4.00% as of December&#160;31, 2007,
    respectively, in each case for a LIBOR-based term loan). Amounts
    under the revolving credit facility can be borrowed and repaid,
    from time to time, at our option, subject to pro forma
    compliance with certain financial covenants. We incurred
    $1.7&#160;million of debt financing costs in association with
    the term loan and revolving credit facility during 2007. In
    2008, we received a refund of a portion of such costs in the
    amount of $0.2&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of June&#160;30, 2009, $68.4&#160;million of borrowings were
    outstanding under the term loan and $0 were outstanding under
    the revolving credit facility. As of December&#160;31, 2008,
    $69.3&#160;million and $0&#160;million of borrowings were
    outstanding under the term loan and the revolving credit
    facility, respectively. For the year ended December&#160;31,
    2008 and for the six months ended June&#160;30, 2009, the
    weighted average interest rate under the term loan was 7.03% and
    3.76%, respectively, before giving effect to the interest rate
    swap. The rate on our interest rate swap is the difference
    between our fixed rate of 4.035% and the floating rate of
    three-month LIBOR.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to paying interest on outstanding principal under
    the credit facility, we are also required to pay a commitment
    fee (0.50% as of June&#160;30, 2009)&#160;on the average daily
    unused commitments available to be drawn under the revolving
    credit facility at a rate determined based on our leverage
    ratio. Our leverage ratio was 2.61 to 1 as of June&#160;30,
    2009. We are also required to pay letter of credit fees, with
    respect to each letter of credit issued, at a rate per annum
    equal to the applicable margin for LIBOR revolving credit loans
    on the average daily amount of undrawn letters of credit minus
    the amount of fronting fee referred to below. We are also
    required to pay fronting fees, with respect to each letter of
    credit issued, at a rate of 0.125% per annum
</DIV>

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    <BR>
    110
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and to pay General Electric Capital Corporation certain
    administrative fees from time to time, in its role as
    administrative agent. Under certain circumstances, we may be
    required to reimburse the lenders under our credit facility for
    certain increased fees and expenses caused by a change
    of&#160;law.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Prepayments</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have the right to optionally prepay our borrowings under the
    term loan or the revolving credit facility, subject to the
    procedures set forth in the credit facility. We may be required
    to make prepayments on our borrowings under the term loan or the
    revolving credit facility if we receive proceeds as a result of
    certain asset sales, debt issuances, events of loss or if we
    have excess cash flow (as defined in the credit facility).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Covenants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The credit facility requires us to maintain certain financial
    ratios, including a leverage ratio (based on the ratio of
    consolidated indebtedness, net of cash and cash equivalents
    subject to control agreements, to consolidated EBITDA, defined
    in the credit facility as earnings before interest, taxes,
    depreciation, derivative losses, changes in deferred revenue,
    stock based compensation, certain investments and permitted
    acquisition expenses, certain permitted payments to Providence
    Equity Partners, unusual non-recurring charges, certain agency
    fees to the administrative agent and adjustments related to the
    acquisition of TeacherWeb, or Adjusted EBITDA), an interest
    coverage ratio (based on the ratio of Adjusted EBITDA to
    consolidated interest expense, as defined in the credit
    facility) and a fixed charge coverage ratio (based on the ratio
    of Adjusted EBITDA to fixed charges, as defined in the credit
    facility). Based on the formulations set forth in the credit
    facility, as of June&#160;30, 2009, we were required to maintain
    a maximum leverage ratio of 4.50 to 1.00, a minimum interest
    coverage ratio of 2.10 to 1.00 and a minimum fixed charge
    coverage ratio of 1.40 to 1.00. As of June&#160;30, 2009, our
    leverage ratio was 2.61 to 1.00, our interest coverage ratio was
    5.45 to 1.00 and our fixed charge coverage ratio was 3.65 to
    1.00. The financial ratios we are required to maintain become
    more restrictive over time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The credit facility also contains certain affirmative and
    restrictive covenants that, among other things, provide
    limitations on the incurrence of additional indebtedness, liens
    on property, sale and leaseback transactions, investments, loans
    and advances, merger or consolidation, asset sales,
    acquisitions, dividends, transactions with affiliates,
    prepayments of any other indebtedness, modifications of our
    organizational documents and restrictions on our subsidiaries.
    The credit facility contains events of default that are
    customary for similar facilities and transactions, including a
    cross-default provision with respect to any other indebtedness
    and an event of default that would be triggered by a change of
    control, as defined in the credit facility, and which is not
    expected to be triggered by this offering. As of
    December&#160;31, 2007, December&#160;31, 2008 and June&#160;30,
    2009, we were in compliance with all covenants.
</DIV>

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    <BR>
    111
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='120'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SHARES
    ELIGIBLE FOR FUTURE SALE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there was no public market for our
    common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sale of
    Restricted Securities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After this offering, there will be
    outstanding&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    (assuming no exercise of the underwriters&#146; option to
    purchase additional shares),
    or&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    (assuming full exercise of the underwriters&#146; option to
    purchase additional shares), of our common stock. Of these
    shares, all of the shares sold in this offering will be freely
    tradable without restriction under the Securities Act of 1933,
    as amended, unless purchased by our &#147;affiliates&#148; as
    that term is defined in Rule&#160;144 under the Securities Act.
    The remaining shares of common stock that will be outstanding
    after this offering are &#147;restricted securities&#148; within
    the meaning of Rule&#160;144 under the Securities Act.
    Restricted securities may be sold in the public market only if
    they are registered under the Securities Act or are sold
    pursuant to an exemption from registration under Rule&#160;144
    under the Securities Act, which is summarized below. Subject to
    the <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described below, shares held by our affiliates that
    are not restricted securities may be sold subject to compliance
    with Rule&#160;144 of the Securities Act without regard to the
    prescribed one-year holding period under Rule&#160;144.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><FONT style="white-space: nowrap">Lock-Up</FONT>
    Arrangements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, we, each of our directors,
    executive officers, the selling stockholders and substantially
    all of our other stockholders have entered into
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described under &#147;Underwriting&#148; that
    restrict the sale of shares of our common stock for up
    to&#160;&#160;days after the date of this prospectus, subject to
    an extension in certain circumstances. In addition, in
    connection with a registration rights agreement we intend to
    enter into with our shareholders of Archipelago Learning
    Holdings, LLC, in connection with this
    offering,&#160;&#160;&#160;% of the shares of our common stock
    acquired by holders of shares of Archipelago Learning Holdings,
    LLC in connection with the Corporate Reorganization will not be
    eligible for sale until&#160;&#160;&#160;days following the
    expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement with the underwriters and the remaining shares of our
    common stock acquired by them in our corporate organization will
    not become eligible for sale until the date that
    is&#160;&#160;&#160;days following the expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement with the underwriters.
    Accordingly,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock will be available for
    resale&#160;&#160;&#160;days following the expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement,
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock will be eligible for sale on the date that
    is&#160;&#160;&#160;&#160;&#160; days following the expiration
    of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement with the underwriters.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    By exercising their registration rights, and selling a large
    number of shares, the selling stockholders could cause the
    prevailing market price of our common stock to decline.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following the
    <FONT style="white-space: nowrap">lock-up</FONT>
    periods set forth in the stockholders&#146; agreement described
    above, all of the shares of our common stock that are restricted
    securities or are held by our affiliates as of the date of this
    prospectus will be eligible for sale in the public market in
    compliance with Rule&#160;144 under the Securities Act.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;144</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The shares of our common stock sold in this offering will
    generally be freely transferable without restriction or further
    registration under the Securities Act, except that any shares of
    our common stock held by an &#147;affiliate&#148; of ours may
    not be resold publicly except in compliance with the
    registration requirements of the Securities Act or under an
    exemption under Rule&#160;144 or otherwise. Rule&#160;144
    permits our common stock that has been acquired by a person who
    is an affiliate of ours, or has been an affiliate of ours within
    the past three months, to be sold into the market in an amount
    that does not exceed, during any three-month period, the
    greater&#160;of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    one percent of the total number of shares of our common stock
    outstanding;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the average weekly reported trading volume of our common stock
    for the four calendar weeks prior to the sale.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    112
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Such sales are also subject to specific manner of sale
    provisions, a six-month holding period requirement, notice
    requirements and the availability of current public information
    about us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rule&#160;144 also provides that a person who is not deemed to
    have been an affiliate of ours at any time during the three
    months preceding a sale, and who has for at least six months
    beneficially owned shares of our common stock that are
    restricted securities, will be entitled to freely sell such
    shares of our common stock subject only to the availability of
    current public information regarding us. A person who is not
    deemed to have been an affiliate of ours at any time during the
    three months preceding a sale, and who has beneficially owned
    for at least one year shares of our common stock that are
    restricted securities, will be entitled to freely sell such
    shares of our common stock under Rule&#160;144 without regard to
    the current public information requirements of Rule&#160;144.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Equity
    Incentive Plans</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to file one or more registration statements on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    under the Securities Act to register shares of our common stock
    issued or reserved for issuance under our equity incentive
    plans, including the equity incentive plan we intend to adopt in
    connection with this offering. The first such registration
    statement is expected to be filed soon after the date of this
    prospectus and will automatically become effective upon filing
    with the SEC. Accordingly, shares registered under such
    registration statement will be available for sale in the open
    market, unless such shares are subject to vesting restrictions
    with us or the
    <FONT style="white-space: nowrap">lock-up</FONT>
    restrictions described above.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    113
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='121'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a general discussion of the material
    U.S.&#160;federal income and estate tax consequences of the
    ownership and disposition of common stock that may be relevant
    to you if you are a
    <FONT style="white-space: nowrap">non-U.S.&#160;Holder</FONT>
    (as defined below). This discussion is based on current law,
    which is subject to change, possibly with retroactive effect.
    This discussion is limited to
    <FONT style="white-space: nowrap">non-U.S.&#160;Holders</FONT>
    who hold shares of common stock as capital assets within the
    meaning of the U.S.&#160;Internal Revenue Code. Moreover, this
    discussion is for general information only and does not address
    all the tax consequences that may be relevant to you in light of
    your particular circumstances, nor does it discuss special tax
    provisions, which may apply to you if you relinquished
    U.S.&#160;citizenship or residence.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As used in this discussion, the term
    <FONT style="white-space: nowrap">&#147;non-U.S.&#160;Holder&#148;</FONT>
    means a beneficial owner of our common stock that is not, for
    U.S.&#160;federal income tax purposes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an individual who is a citizen or resident of the United States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a corporation (or other entity classified as a corporation for
    these purposes) created or organized in or under the laws of the
    United States or of any political subdivision of the United
    States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a partnership (including any entity or arrangement classified as
    a partnership for these purposes);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an estate whose income is includible in gross income for
    U.S.&#160;federal income tax purposes regardless of its
    source;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a trust, if (1)&#160;a U.S.&#160;court is able to exercise
    primary supervision over the trust&#146;s administration and one
    or more &#147;United States persons&#148; (within the meaning of
    the U.S.&#160;Internal Revenue Code) has the authority to
    control all of the trust&#146;s substantial decisions, or
    (2)&#160;the trust has a valid election in effect under
    applicable U.S.&#160;Treasury regulations to be treated as a
    &#147;United States person.&#148;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you are an individual, you may, in many cases, be deemed to
    be a resident alien, as opposed to a nonresident alien, by
    virtue of being present in the United States for at least
    31&#160;days in the calendar year and for an aggregate of at
    least 183&#160;days during a three-year period ending in the
    current calendar year. For these purposes, all the days present
    in the current year, one-third of the days present in the
    immediately preceding year, and one-sixth of the days present in
    the second preceding year are counted. Resident aliens are
    subject to U.S.&#160;federal income tax as if they were
    U.S.&#160;citizens.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a partnership, including any entity or arrangement treated as
    a partnership for U.S.&#160;federal income tax purposes, is a
    holder of our common stock, the tax treatment of a partner in
    the partnership will generally depend upon the status of the
    partner, the activities of the partnership and certain
    determinations made at the partner level. A holder that is a
    partnership, and the partners in such partnership, should
    consult their own tax advisors regarding the tax consequences of
    the purchase, ownership and disposition of our common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT
    A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX
    CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON
    STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE
    LAWS OF ANY U.S.&#160;STATE, MUNICIPALITY OR OTHER TAXING
    JURISDICTION, IN LIGHT OF THE PROSPECTIVE PURCHASER&#146;S
    PARTICULAR CIRCUMSTANCES.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Dividends</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not anticipate making any distributions on our common
    stock in the foreseeable future. See &#147;Dividend
    Policy.&#148; If distributions are paid on shares of our common
    stock, such distributions will constitute dividends for
    U.S.&#160;federal income tax purposes to the extent paid from
    our current or accumulated earnings and profits, as determined
    under U.S.&#160;federal income tax principles. If a distribution
    exceeds our current and accumulated earnings and profits, it
    will constitute a return of capital that reduces, but not below
    zero, a
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    114
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="white-space: nowrap">non-U.S.</FONT>
    Holder&#146;s tax basis in our common stock. Any remainder will
    constitute gain from the sale or exchange of our common stock.
    If dividends are paid, as a
    <FONT style="white-space: nowrap">non-U.S.&#160;Holder,</FONT>
    you will be subject to withholding of U.S.&#160;federal income
    tax at a 30% rate, or a lower rate as may be specified by an
    applicable income tax treaty, on the gross amount of the
    dividends paid to you. To claim the benefit of a lower rate
    under an income tax treaty, you must properly file with the
    payor an Internal Revenue Service
    <FONT style="white-space: nowrap">Form&#160;W-8BEN,</FONT>
    or successor form, claiming an exemption from or reduction in
    withholding under the applicable tax treaty. In addition, where
    dividends are paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;Holder</FONT>
    that is a partnership or other pass-through entity, persons
    holding an interest in the entity may need to provide
    certification claiming an exemption or reduction in withholding
    under the applicable treaty.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If dividends are considered effectively connected with the
    conduct of a trade or business by you within the United States
    and, if required by an applicable income tax treaty, are
    attributable to a U.S.&#160;permanent establishment of yours,
    those dividends will be subject to U.S.&#160;federal income tax
    on a net basis at applicable graduated individual or corporate
    rates but will not be subject to withholding tax, provided an
    Internal Revenue Service
    <FONT style="white-space: nowrap">Form&#160;W-8ECI,</FONT>
    or successor form, is filed with the payor. If you are a foreign
    corporation, any effectively connected dividends may, under
    certain circumstances, be subject to an additional &#147;branch
    profits tax&#148; at a rate of 30% or a lower rate as may be
    specified by an applicable income tax treaty.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You must comply with the certification procedures described
    above, or, in the case of payments made outside the United
    States with respect to an offshore account, certain documentary
    evidence procedures, directly or under certain circumstances
    through an intermediary, to obtain the benefits of a reduced
    rate under an income tax treaty with respect to dividends paid
    with respect to your common stock. In addition, if you are
    required to provide an Internal Revenue Service
    <FONT style="white-space: nowrap">Form&#160;W-8ECI</FONT>
    or successor form, as discussed above, you must also provide
    your tax identification number.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you are eligible for a reduced rate of U.S.&#160;withholding
    tax pursuant to an income tax treaty, you may obtain a refund of
    any excess amounts withheld by timely filing an appropriate
    claim for refund with the Internal Revenue Service.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Gain on
    Disposition of Common Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a
    <FONT style="white-space: nowrap">non-U.S.&#160;Holder,</FONT>
    you generally will not be subject to U.S.&#160;federal income or
    withholding tax on any gain recognized on a sale or other
    disposition of common stock unless:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the gain is considered effectively connected with the conduct of
    a trade or business by you within the United States and, if
    required by an applicable income tax treaty, is attributable to
    a U.S.&#160;permanent establishment of yours (in which case the
    gain will be subject to U.S.&#160;federal income tax on a net
    basis at applicable individual or corporate rates and, if you
    are a foreign corporation, the gain may, under certain
    circumstances, be subject to an additional branch profits tax
    equal to 30% or a lower rate as may be specified by an
    applicable income tax treaty);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    you are an individual who is present in the United States for
    183&#160;or more days in the taxable year of the sale or other
    disposition and certain other conditions are met (in which case,
    except as otherwise provided by an applicable income tax treaty,
    the gain, which may be offset by U.S.&#160;source capital
    losses, generally will be subject to a flat 30%
    U.S.&#160;federal income tax, even though you are not considered
    a resident alien under the U.S.&#160;Internal Revenue
    Code);&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we are or become a U.S.&#160;real property holding corporation
    (&#147;USRPHC&#148;). We believe that we are not currently, and
    are not likely not to become, a USRPHC. Even if we were to
    become a USRPHC, gain on the sale or other disposition of common
    stock by you generally would not be subject to U.S.&#160;federal
    income tax provided:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the common stock was &#147;regularly traded on an established
    securities market&#148;;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    you do not actually or constructively own more than 5% of the
    common stock during the shorter of (i)&#160;the five-year period
    ending on the date of such disposition or (ii)&#160;the period
    of time during which you held such shares.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    115
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Federal
    Estate Tax</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Individuals, or an entity the property of which is includable in
    an individual&#146;s gross estate for U.S.&#160;federal estate
    tax purposes, should note that common stock held at the time of
    such individual&#146;s death will be included in such
    individual&#146;s gross estate for U.S.&#160;federal estate tax
    purposes and may be subject to U.S.&#160;federal estate tax,
    unless an applicable estate tax treaty provides otherwise.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Information
    Reporting and Backup Withholding Tax</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must report annually to the Internal Revenue Service and to
    each of you the amount of dividends paid to you and the tax
    withheld with respect to those dividends, regardless of whether
    withholding was required. Copies of the information returns
    reporting those dividends and withholding may also be made
    available to the tax authorities in the country in which you
    reside under the provisions of an applicable income tax treaty
    or other applicable agreements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Backup withholding is generally imposed (currently at a 28%
    rate, which rate currently is scheduled to increase to 31% for
    taxable years beginning on or after January&#160;1,
    2011)&#160;on certain payments to persons that fail to furnish
    the necessary identifying information to the payor. You
    generally will be subject to backup withholding tax with respect
    to dividends paid on your common stock unless you certify your
    <FONT style="white-space: nowrap">non-U.S.&#160;status.</FONT>
    Dividends subject to withholding of U.S.&#160;federal income tax
    as described above in &#147;&#151;&#160;Dividends&#148; would
    not be subject to backup withholding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The payment of proceeds of a sale of common stock effected by or
    through a U.S.&#160;office of a broker is subject to both backup
    withholding and information reporting unless you provide the
    payor with your name and address and you certify your
    <FONT style="white-space: nowrap">non-U.S.&#160;status</FONT>
    or you otherwise establish an exemption. In general, backup
    withholding and information reporting will not apply to the
    payment of the proceeds of a sale of common stock by or through
    a foreign office of a broker. If, however, such broker is, for
    U.S.&#160;federal income tax purposes, a U.S.&#160;person, a
    controlled foreign corporation, a foreign person that derives
    50% or more of its gross income for certain periods from the
    conduct of a trade or business in the United States or a foreign
    partnership that at any time during its tax year either is
    engaged in the conduct of a trade or business in the United
    States or has as partners one or more U.S.&#160;persons that, in
    the aggregate, hold more than 50% of the income or capital
    interest in the partnership, backup withholding will not apply
    but such payments will be subject to information reporting,
    unless such broker has documentary evidence in its records that
    you are a
    <FONT style="white-space: nowrap">non-U.S.&#160;Holder</FONT>
    and certain other conditions are met or you otherwise establish
    an exemption.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any amounts withheld under the backup withholding rules
    generally will be allowed as a refund or a credit against your
    U.S.&#160;federal income tax liability provided the required
    information is furnished in a timely manner to the Internal
    Revenue Service.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    116
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='122'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">UNDERWRITING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to offer the shares through the underwriters. Merrill
    Lynch, Pierce, Fenner&#160;&#038; Smith Incorporated is acting
    as the representative of the underwriters named below. Subject
    to the terms and conditions described in a purchase agreement
    among us, the selling stockholders and the underwriters, we and
    the selling stockholders have agreed to sell to the
    underwriters, and the underwriters severally have agreed to
    purchase from us and the selling stockholders, the number of
    shares listed opposite their names below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="84%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Underwriter</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -52pt; margin-left: 52pt">
    Merrill Lynch, Pierce, Fenner&#160;&#038; Smith<BR>
    Incorporated
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 62pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters have agreed to purchase all of the shares sold
    under the purchase agreement if any of these shares are
    purchased. If an underwriter defaults, the purchase agreement
    provides that the purchase commitments of the non-defaulting
    underwriters may be increased or the purchase agreement may be
    terminated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We and the selling stockholders have agreed to indemnify the
    underwriters against certain liabilities, including liabilities
    under the Securities Act of 1933, as amended, and to contribute
    to payments the underwriters may be required to make in respect
    of those liabilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters are offering the shares, subject to prior sale,
    when, as and if issued to and accepted by them, subject to
    approval of legal matters by their counsel, including the
    validity of the shares, and other conditions contained in the
    purchase agreement, such as the receipt by the underwriters of
    officer&#146;s certificates and legal opinions. The underwriters
    reserve the right to withdraw, cancel or modify offers to the
    public and to reject orders in whole or in part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Commissions
    and Discounts</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The representative has advised us and the selling stockholders
    that the underwriters propose initially to offer the shares to
    the public at the initial public offering price on the cover
    page of this prospectus and to dealers at that price less a
    concession not in excess of $&#160;&#160;&#160;&#160;&#160; per
    share. The underwriters may allow, and the dealers may reallow,
    a discount not in excess of $&#160;&#160;&#160;&#160;&#160; per
    share to other dealers. After the initial public offering, the
    public offering price, concession and discount may be changed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows the public offering price,
    underwriting discount and proceeds before expenses to us and the
    selling stockholders. The information assumes either no exercise
    or full exercise by the underwriters of their over-allotment
    option.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Share</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Without Option</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>With Option</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to the selling stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The expenses of this offering, not including the underwriting
    discount, are estimated at $&#160;&#160;&#160;&#160;&#160; and
    are payable by us and the selling stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Over-allotment
    Option</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We and the selling stockholders have granted options to the
    underwriters to purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares at the public offering price less the
    underwriting discount. The underwriters may exercise these
    options for 30&#160;days from the date of this prospectus solely
    to cover any over-allotments. If the underwriters exercise these
    options, each will be obligated, subject to conditions contained
    in the purchase
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    117
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    agreement, to purchase a number of additional shares
    proportionate to that underwriter&#146;s initial amount
    reflected in the above table.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">No Sales
    of Similar Securities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We and the selling stockholders and our executive officers and
    directors have agreed, with exceptions, not to sell or transfer
    any common stock for&#160;&#160;&#160;days after the date of
    this prospectus without first obtaining the written consent of
    Merrill Lynch. Specifically, we and these other individuals have
    agreed not to directly or indirectly:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    offer, pledge, sell or contract to sell any common stock,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    sell any option or contract to purchase any common stock,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    purchase any option or contract to sell any common stock,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    grant any option, right or warrant for the sale of any common
    stock,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    lend or otherwise dispose of or transfer any common stock,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    request or demand that we file a registration statement related
    to the common stock,&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    enter into any swap or other agreement that transfers, in whole
    or in part, the economic consequence of ownership of any common
    stock whether any such swap or transaction is to be settled by
    delivery of shares or other securities, in cash or otherwise.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This <FONT style="white-space: nowrap">lock-up</FONT>
    provision applies to common stock and to securities convertible
    into or exchangeable or exercisable for or repayable with common
    stock. It also applies to common stock owned now or acquired
    later by the person executing the agreement or for which the
    person executing the agreement later acquires the power of
    disposition.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="white-space: nowrap">The&#160;&#160;&#160;-day</FONT>
    restricted period will be automatically extended if
    (1)&#160;during the last 17&#160;days of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    restricted period, we issue an earnings release or material news
    or a material event relating to us occurs or (2)&#160;before the
    expiration of
    <FONT style="white-space: nowrap">the&#160;&#160;&#160;-day</FONT>
    restricted period, we announce that we will release earnings
    results or becomes aware that material news or a material event
    will occur during the
    <FONT style="white-space: nowrap">16-day</FONT>
    period beginning on the last day of
    <FONT style="white-space: nowrap">the&#160;&#160;&#160;-day</FONT>
    restricted period, in which case the restrictions described
    above will continue to apply until the expiration of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the issuance of the earnings release or the
    occurrence of the material news or material event. The
    exceptions permit us, among other things and subject to
    restrictions, to issue common stock or options pursuant to our
    long term equity incentive plan or pursuant to the exercise of
    employee stock options or other awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NYSE or
    Nasdaq Listing</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect the shares to be approved for listing on either the
    NYSE or Nasdaq under the symbol &#147;ARCL.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Offering
    Price Determination</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Before this offering, there has been no public market for our
    common stock. The initial public offering price will be
    determined through negotiations among us, the selling
    stockholders and the representative. In addition to prevailing
    market conditions, the factors to be considered in determining
    the initial public offering price are
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the information set forth in this prospectus and otherwise
    available to the underwriters,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the valuation multiples of publicly traded companies that the
    representative believes to be comparable to us,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our financial information,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the history of, and the prospects for, our company and the
    industry in which we compete,
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    118
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an assessment of our management, its past and present
    operations, and the prospects for, and timing of, our future
    revenue,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the present state of our development,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the general condition of the securities markets at the time of
    this offering,&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the above factors in relation to market values and various
    valuation measures of other companies engaged in activities
    similar to ours.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An active trading market for the shares may not develop. It is
    also possible that after the offering the shares will not trade
    in the public market at or above the initial public offering
    price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters do not expect to sell more than 5% of the
    shares in the aggregate to accounts over which they exercise
    discretionary authority.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Price
    Stabilization, Short Positions and Penalty Bids</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until the distribution of the shares is completed, SEC rules may
    limit underwriters and selling group members from bidding for
    and purchasing our common stock. However, the representative may
    engage in transactions that stabilize the price of the common
    stock, such as bids or purchases to peg, fix or maintain that
    price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the underwriters create a short position in the common stock
    in connection with the offering, i.e., if they sell more shares
    than are listed on the cover of this prospectus, the
    representative may reduce that short position by purchasing
    shares in the open market. The representative may also elect to
    reduce any short position by exercising all or part of the
    over-allotment option described above. Purchases of the common
    stock to stabilize its price or to reduce a short position may
    cause the price of the common stock to be higher than it might
    be in the absence of such purchases.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The representative may also impose a penalty bid on underwriters
    and selling group members. This means that if the representative
    purchase shares in the open market to reduce the
    underwriters&#146; short position or to stabilize the price of
    such shares, they may reclaim the amount of the selling
    concession from the underwriters and selling group members who
    sold those shares. The imposition of a penalty bid may also
    affect the price of the shares in that it discourages resales of
    those shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither we nor any of the underwriters makes any representation
    or prediction as to the direction or magnitude of any effect
    that the transactions described above may have on the price of
    the common stock. In addition, neither we nor any of the
    underwriters makes any representation that the representative
    will engage in these transactions or that these transactions,
    once commenced, will not be discontinued without notice.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Selling
    Restrictions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus does not constitute an offer of, or an
    invitation by or on behalf of us, or by or on behalf of the
    underwriters, to subscribe for or purchase, any of the shares in
    any jurisdiction to any person to whom it is unlawful to make
    such an offer or solicitation in that jurisdiction. The
    distribution of this prospectus and the offering of the shares
    in certain jurisdictions may be restricted by law. We and the
    underwriters require persons into whose possession this
    prospectus comes to inform themselves about and to observe any
    such restrictions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">European
    Economic Area</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In relation to each Member State of the European Economic Area
    which has implemented the Prospectus Directive (each, a Relevant
    Member State), each underwriter has represented and agreed that
    with effect from and including the date on which the Prospectus
    Directive is implemented in that Relevant Member State (or the
    Relevant Implementation Date) it has not made and will not make
    an offer of common stock to the public in that Relevant Member
    State before the publication of a prospectus in relation to the
    common stock which has been approved by the competent authority
    in that Relevant Member State or, where
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    119
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    appropriate, approved in another Relevant Member State and
    notified to the competent authority in that Relevant Member
    State, all in accordance with the Prospectus Directive, except
    that it may, with effect from and including the Relevant
    Implementation Date, make an offer of common stock to the public
    in that Relevant Member State at any time:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    to legal entities which are authorized or regulated to operate
    in the financial markets or, if not so authorized or regulated,
    whose corporate purpose is solely to invest in securities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    to any legal entity which has two or more of (i)&#160;an average
    of at least 250&#160;employees during the last financial year;
    (ii)&#160;a total balance sheet of more than &#128;43,000,000
    and (iii)&#160;an annual net turnover of more than
    &#128;50,000,000, as shown in its last annual or consolidated
    accounts;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    in any other circumstances which do not require the publication
    by the Issuer of a prospectus pursuant to Article&#160;3 of the
    Prospectus Directive.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the purposes of this provision, the expression an
    &#147;offer of common stock to the public&#148; in relation to
    any common stock in any Relevant Member State means the
    communication in any form and by any means of sufficient
    information on the terms of the offer and the common stock to be
    offered so as to enable an investor to decide to purchase or
    subscribe the common stock, as the same may be varied in that
    Relevant Member State by any measure implementing the Prospectus
    Directive in that Relevant Member State and the expression
    Prospectus Directive means Directive 2003/71/EC and includes any
    relevant implementing measure in each Relevant Member State.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each underwriter has represented and agreed that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    it has not made or will not make an offer of the common stock to
    the public in the United Kingdom within the meaning of section
    102B of the Financial Services and Markets Act 2000 (as amended)
    (FSMA) except to legal entities which are authorized or
    regulated to operate in the financial markets or, if not so
    authorised or regulated, whose corporate purpose is solely to
    invest in securities or otherwise in circumstances which do not
    require the publication by the company of a prospectus pursuant
    to the Prospectus Rules of the Financial Services
    Authority&#160;(FSA);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    it has only communicated or caused to be communicated and will
    only communicate or cause to be communicated an invitation or
    inducement to engage in investment activity (within the meaning
    of Section&#160;21 of FSMA) to persons who have professional
    experience in matters relating to investments falling within
    Article&#160;19(5) of the Financial Services and Markets Act
    2000 (Financial Promotion) Order 2005 or in circumstances in
    which Section&#160;21 of FSMA does not apply to it;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    it has complied with and will comply with all applicable
    provisions of FSMA with respect to anything done by it in
    relation to the common stock in, from or otherwise involving the
    United Kingdom.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Switzerland</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This document, as well as any other material relating to the
    shares which are the subject of the offering contemplated by
    this prospectus, do not constitute an issue prospectus pursuant
    to Article&#160;652a of the Swiss Code of Obligations. The
    shares will not be listed on the SWX Swiss Exchange and,
    therefore, the documents relating to the shares, including, but
    not limited to, this document, do not claim to comply with the
    disclosure standards of the listing rules of SWX Swiss Exchange
    and corresponding prospectus schemes annexed to the listing
    rules of the SWX Swiss Exchange. The shares are being offered in
    Switzerland by way of a private placement, <I>i.e. </I>to a
    small number of selected investors only, without any public
    offer and only to investors who do not purchase the shares with
    the intention to distribute them to the public. The investors
    will be individually approached by us from time to time. This
    document, as well as any other material relating to the shares,
    is personal and confidential and do not constitute an offer to
    any other person. This document may only be used by those
    investors to whom it has been handed out in connection with the
    offering described
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    120
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    herein and may neither directly nor indirectly be distributed or
    made available to other persons without our express consent. It
    may not be used in connection with any other offer and shall in
    particular not be copied
    <FONT style="white-space: nowrap">and/or</FONT>
    distributed to the public in (or from) Switzerland.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Dubai
    International Financial Centre</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This document relates to an exempt offer in accordance with the
    Offered Securities Rules of the Dubai Financial Services
    Authority. This document is intended for distribution only to
    persons of a type specified in those rules. It must not be
    delivered to, or relied on by, any other person. The Dubai
    Financial Services Authority has no responsibility for reviewing
    or verifying any documents in connection with exempt offers. The
    Dubai Financial Services Authority has not approved this
    document nor taken steps to verify the information set out in
    it, and has no responsibility for it. The shares which are the
    subject of the offering contemplated by this prospectus may be
    illiquid
    <FONT style="white-space: nowrap">and/or</FONT>
    subject to restrictions on their resale. Prospective purchasers
    of the shares offered should conduct their own due diligence on
    the shares. If you do not understand the contents of this
    document you should consult an authorised financial adviser.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Australia</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This document has not been lodged with the Australian
    Securities&#160;&#038; Investments Commission and is only
    directed to certain categories of exempt persons. Accordingly,
    if you receive this document in Australia:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    a.&#160;you confirm and warrant that you are either:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    i.&#160;a &#147;sophisticated investor&#148; under
    section&#160;708(8)(a) or (b)&#160;of the Corporations Act 2001
    (Cth) of Australia (&#147;Corporations Act&#148;);
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ii.&#160;a &#147;sophisticated investor&#148; under
    section&#160;708(8)(c) or (d)&#160;of the Corporations Act and
    that you have provided an accountant&#146;s certificate to the
    section&#160;708(8)(c)(i) or (ii)&#160;of the Corporations Act
    and related regulations before the offer has been made;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    iii.&#160;a person associated with the company under
    section&#160;708(12) of the Corporations Act;&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    iv.&#160;&#147;professional investor&#148; within the meaning of
    section 708(11)(a) or (b)&#160;of the Corporations Act, and to
    the extent that you are unable to confirm or warrant that you
    are an exempt sophisticated investor, associated person or
    professional investor under the Corporations Act any offer made
    to you under this document is void and incapable of acceptance.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    b.&#160;you warrant and agree that you will not offer any of the
    shares issued to you pursuant to this document for resale in
    Australia within 12&#160;months of those shares being issued
    unless any such resale offer is exempt from the requirement to
    issue a disclosure document under section&#160;708 of the
    Corporations Act.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Japan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Shares have not been and will not be registered under the
    Financial Instruments and Exchange Law, as amended (the
    &#147;FIEL&#148;). This document is not an offer of securities
    for sale, directly or indirectly, in Japan or to, or for the
    benefit of, any resident of Japan (which term as used herein
    means any person resident in Japan, including any corporation or
    entity organized under the laws of Japan) or to others for
    reoffer or resale, directly or indirectly, in Japan or to, or
    for the benefit of, any resident of Japan, except pursuant to an
    exemption from the registration requirements under the FIEL and
    otherwise in compliance with such law and any other applicable
    laws, regulations and ministerial guidelines of Japan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Hong
    Kong</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus has not been approved by or registered with the
    Securities and Futures Commission of Hong Kong or the Registrar
    of Companies of Hong Kong. No person may offer or sell in Hong
    Kong, by means of any document, any Shares other than
    (a)&#160;to &#147;professional investors&#148; as defined in the
    Securities and Futures Ordinance (Cap. 571)&#160;of Hong Kong
    and any rules made under that Ordinance; or (b)&#160;in other
    circumstances which do not result in the document being a
    &#147;prospectus&#148; as defined in the Companies
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    121
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Ordinance (Cap. 32)&#160;of Hong Kong or which do not constitute
    an offer to the public within the meaning of that Ordinance. No
    person may issue or have in its possession for the purposes of
    issue, whether in Hong Kong or elsewhere, any advertisement,
    invitation or document relating to the Shares which is directed
    at, or the contents of which are likely to be accessed or read
    by, the public of Hong Kong (except if permitted to do so under
    the securities laws of Hong Kong) other than with respect to
    Shares which are or are intended to be disposed of only to
    persons outside Hong Kong or only to &#147;professional
    investors&#148; as defined in the Securities and Futures
    Ordinance and any rules made under that Ordinance.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The contents have not been reviewed by any regulatory authority
    in Hong Kong. You are advised to exercise caution in relation to
    the offer. If you are in any doubt about any of the contents of
    this document, you should obtain independent professional advice.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Singapore</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus has not been registered as a prospectus with the
    Monetary Authority of Singapore under the Securities and Futures
    Act, Chapter&#160;289 of Singapore (the Securities and Futures
    Act). Accordingly, the shares may not be offered or sold or made
    the subject of an invitation for subscription or purchase nor
    may this prospectus or any other document or material in
    connection with the offer or sale or invitation for subscription
    or purchase of any shares be circulated or distributed, whether
    directly or indirectly, to any person in Singapore other than
    (a)&#160;to an institutional investor pursuant to
    Section&#160;274 of the Securities and Futures Act, (b)&#160;to
    a relevant person, or any person pursuant to
    Section&#160;275(1A) of the Securities and Futures Act, and in
    accordance with the conditions specified in Section&#160;275 of
    the Securities and Futures Act, or (c)&#160;pursuant to, and in
    accordance with the conditions of, any other applicable
    provision of the Securities and Futures Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of the following relevant persons specified in
    Section&#160;275 of the Securities and Futures Act who has
    subscribed for or purchased shares, namely a person who&#160;is:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;a corporation (which is not an accredited investor) the
    sole business of which is to hold investments and the entire
    share capital of which is owned by one or more individuals, each
    of whom is an accredited investor;&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;a trust (where the trustee is not an accredited
    investor) whose sole purpose is to hold investments and each
    beneficiary is an accredited investor,
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    should note that shares, debentures and units of shares and
    debentures of that corporation or the beneficiaries&#146; rights
    and interest in that trust shall not be transferable for six
    months after that corporation or that trust has acquired the
    shares under Section&#160;275 of the Securities and Futures Act
    except:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;to an institutional investor under Section&#160;274 of
    the Securities and Futures Act or to a relevant person, or any
    person pursuant to Section&#160;275(1A) of the Securities and
    Futures Act, and in accordance with the conditions, specified in
    Section&#160;275 of the Securities and Futures&#160;Act;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;where no consideration is given for the
    transfer;&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;by operation of law.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Internet
    Distribution</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Merrill Lynch will be facilitating internet distribution for
    this offering to certain of its internet subscription customers.
    Merrill Lynch intends to allocate a limited number of shares for
    sale to its online brokerage customers. An electronic prospectus
    is available on internet web sites maintained by Merrill Lynch.
    Other than the prospectus in electronic format, the information
    on Merrill Lynch&#146;s web sites is not part of this prospectus.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    122
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Other
    Relationships</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriter and its affiliates have engaged in, and may in
    the future engage in, investment banking and other commercial
    dealings in the ordinary course of business with us. They have
    received customary fees and commissions for these transactions.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    123
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='123'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Weil, Gotshal&#160;&#038; Manges LLP has passed upon the
    validity of the common stock offered hereby on behalf of us.
    Certain legal matters will be passed upon on behalf of the
    underwriters by Fried, Frank, Harris, Shriver&#160;&#038;
    Jacobson LLP, New York, New York.
</DIV>
<A name='124'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The balance sheet of Archipelago Learning, Inc. as of
    August&#160;31, 2009, included in this prospectus, has been
    audited by Deloitte&#160;&#038; Touche LLP, an independent
    registered public accounting firm, as stated in their report
    appearing herein and elsewhere in the registration statement of
    which this prospectus is a part. Such balance sheet is included
    in reliance upon the report of such firm given upon their
    authority as experts in accounting and auditing.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements of Archipelago Learning Holdings, LLC
    as of December&#160;31, 2007 and 2008, and for each of the three
    years in the period ended December&#160;31, 2008, included in
    this prospectus, have been audited by Deloitte&#160;&#038;
    Touche LLP, an independent registered public accounting firm, as
    stated in their report appearing herein and elsewhere in the
    registration of which this prospectus is a part. Such financial
    statements are included in reliance upon the report of such firm
    given upon their authority as experts in accounting and auditing.
</DIV>
<A name='125'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">WHERE YOU
    CAN FIND ADDITIONAL INFORMATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed with the SEC a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    under the Securities Act with respect to the common stock
    offered hereby. This prospectus does not contain all of the
    information set forth in the registration statement and the
    exhibits and schedules thereto. For further information with
    respect to Archipelago Learning, Inc. and the common stock
    offered hereby, you should refer to the registration statement
    and to the exhibits and schedules filed therewith. Statements
    contained in this prospectus regarding the contents of any
    contract or any other document that is filed as an exhibit to
    the registration statement are not necessarily complete, and
    each such statement is qualified in all respects by reference to
    the full text of such contract or other document filed as an
    exhibit to the registration statement. A copy of the Archipelago
    Learning, Inc. registration statement and the exhibits and
    schedules thereto may be inspected without charge at the public
    reference room maintained by the SEC located at
    100&#160;F&#160;Street, N.E., Room&#160;1580,
    Washington,&#160;D.C. 20549. Copies of all or any portion of the
    registration statements and the filings may be obtained from
    such offices upon payment of prescribed fees. The public may
    obtain information on the operation of the public reference room
    by calling the SEC at
    <FONT style="white-space: nowrap">1-800-SEC-0330</FONT>
    or
    <FONT style="white-space: nowrap">(202)&#160;551-8090.</FONT>
    The SEC maintains a website at www.sec.gov that contains
    reports, proxy and information statements and other information
    regarding registrants that file electronically with the&#160;SEC.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You may obtain a copy of any of our filings, at no cost, by
    writing or telephoning us at:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning, Inc.
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    3400 Carlisle Street, Suite&#160;345
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dallas, TX 75204
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="white-space: nowrap">(800)&#160;419-3191</FONT>
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    124
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='126'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INDEX TO
    FINANCIAL STATEMENTS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="95%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Archipelago Learning, Inc.</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <I>Audited Financial Statement</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#301'>Report of Independent Registered Public
    Accounting Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#302'>Balance Sheet as of August&#160;31, 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#303'>Notes to Balance Sheet</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Archipelago Learning Holdings, LLC</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <I>Audited Consolidated Financial Statements</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#305'>Report of Independent Registered Public
    Accounting Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#306'>Consolidated Balance Sheets as of
    December&#160;31, 2007 and 2008 and June&#160;30, 2009
    (unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-6
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#307'>Consolidated Statements of Income for the years
    ended December&#160;31, 2006, 2007 and 2008 and the six months
    ended June&#160;30, 2008 and 2009 (unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-7
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#308'>Consolidated Statements of Changes in
    Members&#146; Equity for the years ended December&#160;31, 2006,
    2007 and 2008 and the six months ended June&#160;30, 2009
    (unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-8
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#309'>Consolidated Statements of Cash Flows for the
    year ended December&#160;31, 2006, 2007 and 2008 and the six
    months ended June&#160;30, 2008 and 2009 (unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-9
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#310'>Notes to Consolidated Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-10
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-1
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='301'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the Board of Directors and Stockholder of
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning, Inc.
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dallas, Texas
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the accompanying balance sheet of Archipelago
    Learning, Inc. (the &#147;Company&#148;) as of August&#160;31,
    2009. This financial statement is the responsibility of the
    Company&#146;s management. Our responsibility is to express an
    opinion on this financial statement based on our audit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conducted our audit in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. The Company is not required to
    have, nor were we engaged to perform, an audit of its internal
    control over financial reporting. Our audits included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the Company&#146;s internal control over
    financial reporting. Accordingly, we express no such opinion. An
    audit also includes examining, on a test basis, evidence
    supporting the amounts and disclosures in the financial
    statements, assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audit provides a reasonable basis for our opinion.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, such financial statement presents fairly, in all
    material respects, the financial position of Archipelago
    Learning, Inc. as of August&#160;31, 2009, in conformity with
    accounting principles generally accepted in the United States of
    America.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    /s/ DELOITTE &#038; TOUCHE LLP<BR>
    <BR>
    Dallas, Texas
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    September&#160;2, 2009
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-2
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING, INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='302'><B><FONT style="font-family: 'Times New Roman', Times">BALANCE
    SHEET AS OF AUGUST&#160;31, 2009</FONT></B></A>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="92%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD colspan="5" align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>ASSETS</B>
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD colspan="5" align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>STOCKHOLDER EQUITY</B>
</DIV>
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock (par value $10.00 per share, 100&#160;shares
    authorized, issued and outstanding)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-3
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING, INC.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <A name='303'><B>NOTES TO BALANCE SHEET</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    </A><B>AS OF AUGUST&#160;31, 2009</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">1.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ORGANIZATION</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning, Inc. (the &#147;Company&#148;) was
    incorporated as a Delaware corporation on August&#160;4, 2009,
    and has no material assets or any operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">BASIS OF
    PRESENTATION</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s Balance Sheet has been prepared in accordance
    with U.S.&#160;generally accepted accounting principles.
    Separate Statements of Income, Changes in Stockholders&#146;
    Equity and of Cash Flows have not been presented because this
    entity has had no activity.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">3.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">STOCKHOLDER
    EQUITY</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has been capitalized with the issuance of
    100&#160;shares of Common Stock with a par value of $10.00 per
    share for a total of $1,000.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='305'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the Board of Managers and Stockholders of
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dallas, Texas
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the accompanying consolidated balance sheets of
    Archipelago Learning Holdings, LLC and subsidiaries (the
    &#147;Company&#148;) as of December&#160;31, 2008 and 2007, and
    the related consolidated statements of income, changes in
    members&#146; equity and cash flows for each of the three years
    in the period ended December&#160;31, 2008. These financial
    statements are the responsibility of the Company&#146;s
    management. Our responsibility is to express an opinion on these
    financial statements based on our audits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. The Company is not required to
    have, nor were we engaged to perform, an audit of its internal
    control over financial reporting. Our audits included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the Company&#146;s internal control over
    financial reporting. Accordingly, we express no such opinion. An
    audit also includes examining, on a test basis, evidence
    supporting the amounts and disclosures in the financial
    statements, assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audits provide a reasonable basis for our opinion.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, such consolidated financial statements present
    fairly, in all material respects, the financial position of
    Archipelago Learning Holdings, LLC and subsidiaries as of
    December&#160;31, 2008 and 2007, and the results of its
    operations and its cash flows for each of the three years in the
    period ended December&#160;31, 2008, in conformity with
    accounting principles generally accepted in the United States of
    America.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    /s/ DELOITTE &#038; TOUCHE LLP
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dallas, Texas
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    March&#160;24, 2009 (September&#160;2, 2009 as to earnings per
    share described in Note&#160;2, the fair value of financial
    instruments described in Note&#160;3, segment information
    described in Note&#160;14, and the subsequent event described in
    Note&#160;16)
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='306'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CONSOLIDATED
    BALANCE SHEETS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="65%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pro Forma<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>June&#160;30,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>June&#160;30,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands, except share data)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(See Note 2)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD colspan="17" align="center" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>ASSETS</B>
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    CURRENT ASSETS:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    11,060
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,144
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Accounts receivable&#160;&#151; net of allowance for doubtful
    accounts
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,674
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,093
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,344
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Prepaid expenses and other current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    469
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    357
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    818
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Total current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,203
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,594
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,102
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    PROPERTY AND EQUIPMENT&#160;&#151; Net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    793
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,782
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,781
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    GOODWILL
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94,373
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    103,267
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    103,267
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    INTANGIBLE ASSETS&#160;&#151; Net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,551
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,106
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,087
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    OTHER LONG-TERM ASSETS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,671
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,276
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,175
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    TOTAL
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    127,591
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    142,025
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    144,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD colspan="17">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="17" align="center" valign="bottom">
    <B>LIABILITIES AND MEMBERS&#146; EQUITY</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    CURRENT LIABILITIES:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Accounts payable&#160;&#151; trade
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    57
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    382
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    309
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Wage and employee-related liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,640
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,918
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,536
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Deferred revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,819
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,632
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,758
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Other accrued liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    219
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    192
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    248
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Current portion of long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Interest payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    191
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    210
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Interest rate swap
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,988
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Total current liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,234
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    LONG-TERM DEBT&#160;&#151; Net of current portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    67,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    LONG-TERM DEFERRED REVENUE&#160;&#151; Net of current portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,112
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,290
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,710
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    LONG-TERM DEFERRED TAX LIABILITY
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    639
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    563
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    OTHER LONG-TERM LIABILITY (NOTE&#160;9)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    230
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    COMMITMENTS AND CONTINGENCIES (NOTE&#160;10)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    MEMBERS&#146; EQUITY:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Class&#160;A shares (109,545,064&#160;shares authorized, issued
    and outstanding at December&#160;31, 2007 and 2008 and
    June&#160;30, 2009)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,792
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,792
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,792
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    (no shares authorized, issued and outstanding at
    December&#160;31, 2007; 286,882&#160;shares authorized, issued
    and outstanding at December&#160;31, 2008 and June&#160;30, 2009)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Class&#160;B shares (6,085,837&#160;shares authorized,
    5,720,692&#160;shares issued and outstanding at
    December&#160;31, 2007; 6,578,727&#160;shares authorized,
    5,355,440&#160;shares issued and outstanding at
    December&#160;31, 2008; 6,578,727&#160;shares authorized,
    6,028,727&#160;shares issued and outstanding at June&#160;30,
    2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    345
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    684
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    855
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Class&#160;C shares (6,085,837&#160;shares authorized,
    5,720,692&#160;shares issued and outstanding at
    December&#160;31, 2007; 7,126,451&#160;shares authorized,
    5,903,164&#160;shares issued and outstanding at
    December&#160;31, 2008; 7,126,451&#160;shares authorized,
    6,576,451&#160;shares issued and outstanding at June&#160;30,
    2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    302
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Retained earnings
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,946
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,209
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Total members&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38,347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,474
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44,949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    TOTAL
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    127,591
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    142,025
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    144,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='307'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CONSOLIDATED
    STATEMENTS OF INCOME</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="37%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterright -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Twelve Months Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Six Months Ended June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Predecessor)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" align="center" valign="bottom">
    <B>(Successor)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="19" align="center" valign="bottom">
    <B>(In thousands, except share and per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    &nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    SERVICE REVENUE
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,065
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    32,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    21,427
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    COST OF REVENUE
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,178
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,782
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    GROSS PROFIT
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,722
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29,890
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,297
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,645
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    OPERATING EXPENSES:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,793
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,669
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,193
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,195
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Content development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    712
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,162
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    926
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,588
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,644
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,310
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,417
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,086
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,885
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,999
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,431
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,977
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    INCOME FROM OPERATIONS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,615
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,891
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,866
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,668
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    OTHER INCOME (EXPENSE):
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (838
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,161
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,745
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,377
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Interest income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    247
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    160
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Derivative loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (173
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (309
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (141
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (668
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,033
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,894
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,504
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    INCOME BEFORE INCOME TAXES
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,947
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    (Provision) benefit for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (23
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (42
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (133
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    NET INCOME
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net income per equity share attributable to members&#146; equity:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Basic and Diluted (NOTE&#160;2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.03
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Weighted-average equity shares and equivalents outstanding:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Basic and Diluted (NOTE&#160;2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545,064
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545,064
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545,064
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545,064
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Unaudited pro forma net income per common share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Basic and Diluted (NOTE&#160;2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Unaudited pro forma weighted-average common shares and
    equivalents outstanding:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Basic and Diluted (NOTE&#160;2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='308'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CONSOLIDATED
    STATEMENTS OF CHANGES IN MEMBERS&#146; EQUITY
    (DEFICIT)</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 6pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="32%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=09 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=09 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=10 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=10 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=10 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=10 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=11 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=11 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=11 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=11 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=12 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=12 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=12 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=12 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Study Island LP<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Class C<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Members&#146;<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Partner Capital<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Class A Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Class A-2 Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Class B Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Retained<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(Deficit)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Units</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Value</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Units</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Value</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Units</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Value</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Units</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Value</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Earnings</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(Deficit)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="42" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -6pt; margin-left: 6pt">
    BALANCE&#160;&#151; January&#160;1, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,844
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,844
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Distributions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,354
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,354
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -6pt; margin-left: 6pt">
    BALANCE&#160;&#151; December&#160;31, 2006 (Predecessor)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,535
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,535
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Distribution to predecessor
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,178
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,178
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Reorganization due to change in ownership
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,713
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,713
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Shares issued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Distributions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (74,753
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (74,753
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,721
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    345
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,721
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -6pt; margin-left: 6pt">
    BALANCE&#160;&#151; December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,792
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,721
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    345
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,721
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38,347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Shares issued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    287
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    372
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Forfeitures of stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (822
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (274
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (47
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -6pt; margin-left: 6pt">
    BALANCE&#160;&#151; December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,792
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    287
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,355
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    684
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,903
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    302
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,946
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    40,474
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Distributions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (768
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (768
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    673
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    171
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    673
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    41
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 13pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -6pt; margin-left: 6pt">
    BALANCE&#160;&#151; June&#160;30, 2009 (unaudited)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,792
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    287
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,028
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    855
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,576
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,209
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    44,949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='309'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CONSOLIDATED
    STATEMENTS OF CASH FLOWS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterright -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Twelve Months Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Six Months Ended June&#160;30,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Predecessor)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="14" align="center" valign="bottom">
    <B>(Successor)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="19" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    &nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    CASH FLOW FROM OPERATING ACTIVITIES:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,663
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,022
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,031
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Adjustments to reconcile net income to net cash provided by
    operating activities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Amortization of debt financing costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    81
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    71
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,670
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,183
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,520
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    355
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Unrealized gain on investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (21
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Provision (benefit) for uncollectable accounts receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    51
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Unrealized loss (gain) on interest rate swap
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    205
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,783
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    228
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (414
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Deferred income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (247
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (99
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Changes in operating assets and liabilities, net of impact of
    acquisitions:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Accounts receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,129
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,542
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,270
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (674
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (254
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Prepaid expenses and other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (469
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    176
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (69
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (437
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    276
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (211
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Accrued liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    428
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,557
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    252
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (482
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (426
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,439
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,613
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,791
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,727
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (454
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Other long-term liability
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    230
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 40pt">
    Net cash provided by operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,451
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,718
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,551
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,849
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,801
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    CASH FLOWS FROM INVESTING ACTIVITIES:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Purchase of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (211
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (498
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,324
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (542
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (363
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Business acquisition
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (84,787
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9,658
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9,658
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 40pt">
    Net cash used in investing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (211
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (85,285
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,982
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,200
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (363
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    CASH FLOWS FROM FINANCING ACTIVITIES:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Distributions to predecessor
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,354
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (846
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Proceeds from issuance of shares
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    89,545
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Return of Capital distributions to parent shareholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (74,753
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Advance to shareholder
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (750
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Tax distribution to parent shareholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (768
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Cost of debt financing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,706
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Proceeds from revolver
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Payments on revolver
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Proceeds from term note
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Payment on term note
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (700
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (350
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (874
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 40pt">
    Net cash (used in) provided by financing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,354
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    82,240
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (485
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (885
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,642
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    NET CHANGE IN CASH AND CASH EQUIVALENTS:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    886
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,673
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,084
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,236
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,796
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Beginning of period
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    501
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,387
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,060
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,060
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,144
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    End of period
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,387
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    11,060
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,144
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,824
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Cash paid for interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    612
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,992
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,626
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,371
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Cash paid for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    44
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    NON-CASH INVESTING AND FINANCING ACTIVITIES
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Accrued purchases of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    49
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    138
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Non-cash distribution to Predecessor (Note&#160;10)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    332
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Issuance of shares in business acquisitions (Note&#160;1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>


<A name='310'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL STATEMENTS</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    </A><B>FOR THE YEAR ENDED DECEMBER 31, 2006 (PREDECESSOR),<BR>
    AS OF AND FOR THE YEARS ENDED 2007 AND 2008<BR>
    (SUCCESSOR) AND AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2008
    AND 2009</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">1.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ORGANIZATION</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLC (the &#147;Company&#148;) is
    a leading subscription-based online education company. The
    Company provides standards-based instruction, practice,
    assessments and productivity tools that improve the performance
    of educators and students via proprietary web-based platforms.
    Study Island, our core product line, helps students in
    Kindergarten through 12th&#160;grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the 2008-2009 school year, Study Island products were utilized
    by 8.3&#160;million students in over 19,200 schools in
    50&#160;states who answered over 2.8&#160;billion practice
    questions. The Company recently began offering classroom and
    school web portals, digital lockers and teacher productivity
    tools through their TeacherWeb services and online post
    secondary programs through their Northstar Learning product line.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning, Inc. was incorporated as a Delaware
    corporation on August&#160;4, 2009, and will act as a holding
    company for the Company&#146;s business upon completion of the
    offering. The Company initially capitalized Archipelago
    Learning, Inc. with $1,000 for 100&#160;shares of Archipelago
    Learning, Inc. Archipelago Learning, Inc. has no operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On July&#160;2, 2009, the Company changed its name from
    &#147;Study Island Holdings, LLC&#148; to &#147;Archipelago
    Learning Holdings, LLC.&#148; Study Island Holdings, LLC through
    July&#160;1, 2009, Archipelago Learning Holdings, LLC from
    July&#160;2, 2009 are referred to herein as &#147;the
    Company.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Purchase
    Transaction</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Study Island Holdings, LLC, a Delaware limited liability
    company, and Study Island, LLC, a Delaware limited liability
    company, were formed in December 2006 and had no activities
    prior to January&#160;10, 2007. On January&#160;10, 2007,
    substantially all of the assets of Study Island, LP (the
    &#147;Predecessor&#148;), a Texas partnership, were sold to the
    Company. Periods presented prior to January&#160;10, 2007,
    represent the operations of the Predecessor. The change of
    ownership was approved by all of the managers of the Company.
    The transaction was recorded as a business combination with the
    resulting assets acquired and liabilities assumed being recorded
    at fair value determined on the information available and
    assumptions as to future operations. The partners of the
    Predecessor retained an 18.2% interest in the Company by
    exchanging $20,000,000 of their interests in the Predecessor for
    Class&#160;A shares in the Company. Because of the acquisition,
    the resulting purchase accounting of the acquirers has been
    reflected in the accompanying consolidated financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The purchase price was allocated as follows (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="89%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Working capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (7,053
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    346
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net acquired assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,413
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash paid to sellers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    80,226
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transaction costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,560
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total cash paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    84,786
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Issuance of Class&#160;A shares
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total purchase price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    104,786
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Goodwill
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    94,373
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-10
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Contained within the 2007 consolidated financial statements are
    nine calendar days of operations and cash flows of the
    Predecessor. Such amounts are not material to the overall 2007
    consolidated financial statements taken as a whole. Further, the
    consolidated financial position of the Predecessor immediately
    prior to the January&#160;10, 2007, transaction was not
    materially different from that of December&#160;31, 2006.
    Accordingly, the Company has chosen January&#160;1, 2007, as a
    date of convenience in presenting successor operating results
    and the financial statement information for the period from
    January&#160;1, 2007 through January&#160;9, 2007 has not been
    presented separately. All periods ending prior to
    January&#160;1, 2007 are referred to as &#147;Predecessor,&#148;
    and all periods including and after such date are referred to as
    &#147;Successor.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying consolidated financial statements include the
    balances and results of operations of the Company and its wholly
    owned subsidiaries. All intercompany balances and transactions
    have been eliminated in consolidation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Unaudited Interim Financial Information&#160;&#151; </I>The
    accompanying unaudited interim consolidated balance sheet as of
    June&#160;30, 2009, the consolidated statements of income and
    cash flows for the six months ended June&#160;30, 2008 and 2009,
    and the consolidated statement of changes in members&#146;
    equity for the six months ended June&#160;30, 2009 are
    unaudited. These unaudited interim consolidated financial
    statements have been prepared in accordance with accounting
    principles generally accepted in the United States. In the
    opinion of the Company&#146;s management, the unaudited interim
    consolidated financial statements have been prepared on the same
    basis as the audited consolidated financial statements and
    include all adjustments necessary for the fair presentation of
    the Company&#146;s balance sheet as of June&#160;30, 2009,
    statements of income, and its cash flows for the six months
    ended June&#160;30, 2008 and 2009. The results for the six
    months ended June&#160;30, 2009 are not necessarily indicative
    of the results to be expected for the year ending
    December&#160;31, 2009. All references to June&#160;30, 2009 or
    to the six months ended June&#160;30, 2008 and 2009 in the notes
    to the consolidated financial statements are unaudited.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Unaudited Pro Forma Presentation</I>&#160;&#151; The pro
    forma balance sheet data as of June&#160;30, 2009 and pro forma
    net income per common share for the six months ended
    June&#160;30, 2009 reflect the conversion of all outstanding
    shares of the Company&#146;s Class&#160;A,
    <FONT style="white-space: nowrap">Class&#160;A-2,</FONT>
    Class&#160;B and Class&#160;C members&#146; equity into an
    aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares assuming the completion of the initial public officering
    has occurred as of June&#160;30, 2009 and January&#160;1, 2009,
    respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Estimates</I>&#160;&#151; Management uses estimates and
    assumptions in preparing financial statements in accordance with
    accounting principles generally accepted in the United States of
    America. Those estimates and assumptions affect the reported
    amounts of assets and liabilities, the disclosure of contingent
    assets and liabilities, and the reported sales and expenses.
    Accordingly, actual results could differ from the estimates that
    were used. The Company&#146;s most significant estimates and
    assumptions include those relating to revenue recognition, stock
    based compensation and valuations of goodwill and intangible
    assets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Revenue Recognition</I>&#160;&#151; The Company generates
    service revenue from customer subscriptions, which consist of
    standards-based instruction, practice, assessments and
    productivity tools; and individual buys, which are individual
    purchases for access to a product (one subject in a specific
    state for a specific grade level). Training fees, which are fees
    from customers to pay for onsite or online training sessions,
    are also recognized over the subscription period. Subscription
    revenue may be characterized as new subscriptions and sales from
    existing customers. For the years 2006, 2007, and 2008,
    subscription revenue accounted for 97.3%, 98.0%, and 98.4% of
    the Company&#146;s service revenue, respectively. For the six
    months ended June&#160;30, 2008 and 2009 (unaudited),
    subscription revenue accounted for 99.1% and 98.4% of the
    Company&#146;s service revenue, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Service revenue is recognized when all of the following
    conditions are satisfied: there is persuasive evidence of an
    arrangement, the service has been provided to the customer, the
    collection of the fees is
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-11
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    reasonably assured, and the amount of the fees to be paid by the
    customer is fixed or determinable. The Company&#146;s
    arrangements do not contain general rights of return.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subscription revenue for new and renewals from existing
    customers are recognized ratably over the subscription terms
    beginning on the commencement dates of each subscription. The
    traditional subscription term is 12&#160;months, and all
    subscriptions are on a noncancelable basis. When additional
    months are offered as a promotional incentive, those months are
    part of the subscription period. As part of their subscriptions,
    customers generally benefit from new features and functionality
    with each release at no additional cost.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Training sessions are offered to the Company&#146;s customers in
    conjunction with the subscriptions to train the customers on
    implementing, using, and administering the Study Island
    programs. Training revenue is recognized over the life of the
    subscription. Customer support is provided to customers
    following the sale at no additional charge and at a minimal cost
    per call.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company defers the total amount of the sale of
    subscriptions, training, and support as deferred revenue when
    the customer is invoiced and recognizes the revenue on a
    straight-line basis over the subscription period. The Company
    does not incur significant up-front costs related to providing
    its products and services and therefore has not deferred any
    expenses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of Revenue</I>&#160;&#151; Cost of revenue consists of
    the direct and indirect costs to host and make available its
    products and services to our customers. A significant portion of
    the cost of revenue includes salaries, bonuses, stock-based
    compensation and employee benefit costs and taxes related to
    engineering personnel who maintain the Company&#146;s servers
    and technical equipment and work on our web-based hosted
    platform. The employee benefits costs and taxes are allocated
    based upon a percentage of total compensation expense. Other
    direct and indirect costs include recruiting and relocation fees
    associated with engineering employees, contracted labor,
    facility costs for the Company&#146;s web platform servers and
    routers, including backup servers that are maintained in
    colocation facilities in Dallas, Texas, depreciation expense on
    those servers and routers, network monitoring costs and
    amortization of Study Island&#146;s technical development
    intangible assets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Operating Expenses</I>&#160;&#151; Operating expenses consist
    of sales and marketing, content development and general and
    administrative expenses. Sales and marketing expense consists
    primarily of salaries, commissions, benefits and stock-based
    compensation for sales and marketing personnel for the
    Company&#146;s inside and outside sales team, marketing,
    customer service, training and account management. Sales and
    marketing also includes direct marketing costs, travel and
    entertainment and amortization of customer relationship
    intangible assets. Content development expense consists
    primarily of salaries, benefits and stock-based compensation for
    employees who are responsible for writing the questions for the
    Company&#146;s products and amortization of content intangible
    asset. General and administrative expense consists primarily of
    salaries, benefits and stock-based compensation for general and
    administrative employees that includes executives, finance and
    accounting, human resources, customer relations and order
    management. General and administrative also includes accounting
    and legal professional services fee, rent, insurance, travel and
    entertainment expense, depreciation and other corporate expenses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Software Development Costs</I>&#160;&#151; Software
    development costs are accounted for in accordance with the
    Financial Accounting Standards Board (FASB) Statement
    No.&#160;86, <I>Accounting for the Costs of Computer Software to
    Be Sold, Leased, or Otherwise Marketed, </I>which establishes
    the standards of financial accounting and reporting for the cost
    of computer software to be sold, leased, or otherwise marketed
    as a separate product or as part of a product or process,
    whether internally developed or purchased. The cost of the core
    web-based delivery technology and content was recognized upon
    the Company&#146;s acquisition in accordance with purchase
    accounting and is being amortized over 10&#160;years. The
    Company is continually improving, upgrading, and enhancing both
    the content delivered to its customers and the software used to
    deliver this content and, as such, these costs are being
    expensed as incurred.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-12
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cash and Cash Equivalents</I>&#160;&#151; Cash and cash
    equivalents include highly liquid short-term investments
    purchased with original maturities of three months or less.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Accounts Receivable</I>&#160;&#151; The Company carries its
    accounts receivable at cost, less an allowance for doubtful
    accounts, which is based on management&#146;s assessment of the
    collectability of accounts receivable. The Company extends
    unsecured credit to its customers in the ordinary course of
    business, but mitigates the associated credit risk by performing
    ongoing credit evaluations of its customers. The vast majority
    of the Company&#146;s customers are public schools, which
    receive their funding from the local, state and federal
    government. The Company evaluates the adequacy of the allowance
    for doubtful accounts based on a specific customer review of the
    outstanding accounts receivables.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes the changes in the Company&#146;s
    allowance for doubtful accounts for the respective periods
    (amounts in thousands):
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="56%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Predecessor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Successor</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Allowance for doubtful accounts:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Beginning balance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Charged to costs and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    71
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Deductions&#160;&#151; accounts written off
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (20
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Ending balance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    89
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The allowance for doubtful account as of June&#160;30, 2009
    (unaudited) is $91,599.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Property and Equipment</I>&#160;&#151; Property and equipment
    are recorded at cost, less accumulated depreciation.
    Depreciation on property and equipment is provided in amounts
    sufficient to relate the cost of the assets to operations over
    their estimated service lives using the straight-line method.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="43%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="55%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Useful Lives</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture and fixtures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Seven years
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Office equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Five years
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Three to five years
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Three years
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Leasehold improvements
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Shorter of the estimated useful life or the lease term
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Major repairs or replacements of property and equipment are
    capitalized. Maintenance repairs and minor replacements are
    charged to operations as incurred. Equipment retirements are
    removed from the records at their cost and related accumulated
    depreciation and any resulting gain or loss is included in
    earnings.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Goodwill, Intangible Assets and Long-Lived
    Assets</I>&#160;&#151; Goodwill represents the excess of the
    cost of an acquisition over the fair value of net assets
    acquired. In accordance with FASB Statement No.&#160;142,
    <I>Goodwill and Other Intangible Assets</I>, goodwill is
    assessed for impairment at the reporting unit level at least
    annually or more frequently when events and circumstances occur
    indicating that the recorded goodwill may be impaired. The first
    step of the impairment test requires the identification of the
    reporting units, and comparison of the fair value of each of
    these reporting units to the respective carrying value. The fair
    value of the reporting units is determined based on valuation
    techniques using the best information that is available, such as
    discounted cash flow projections. If the carrying value is less
    than the fair value, no impairment exists and the second step is
    not performed. If the carrying value is higher than the fair
    value, there is an indication that impairment may exist and the
    second step must be performed to compute the amount of the
    impairment.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-13
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the second step, the impairment is computed by comparing the
    implied fair value of reporting unit goodwill with the carrying
    amount of that goodwill. The annual impairment tests are
    performed in the fourth quarter of each year. No goodwill
    impairment was identified in 2007 or 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Intangible assets and other long-lived assets are reviewed for
    impairment when events or changes in circumstances indicate the
    carrying amount may not be recoverable, in accordance with FASB
    Statement No.&#160;144, <I>Accounting for Impairment or Disposal
    of Long-Lived Assets</I>. If impairment indicators exist, an
    assessment of undiscounted future cash flows to be generated by
    such assets is made. If the results of the analysis indicate
    impairment, the assets are adjusted to fair market value.
    Intangible assets with finite lives are amortized using the
    straight-line method over their estimated useful lives. No
    intangible or long-lived assets impairment loss was identified
    in 2006, 2007 or 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Deferred Financing Costs</I>&#160;&#151; Deferred financing
    costs are incurred to obtain long-term financing and are
    amortized using the effective interest method over the term of
    the related debt. The amortization of deferred financing costs,
    which are classified in interest expense in statement of income,
    was $0, $35,543 and $179,338 for the years ended
    December&#160;31, 2006, 2007 and 2008, respectively and $81,498
    and $101,089 for the six months ended June&#160;30, 2008 and
    2009 (unaudited), respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Income Taxes</I>&#160;&#151; The Company is treated as a
    partnership and, is not a taxpaying entity for federal income
    tax purposes. As a result, the Company&#146;s income is taxed to
    its members in their individual federal income tax returns. The
    Company&#146;s wholly owned subsidiary, TeacherWeb, Inc.
    (&#147;TeacherWeb&#148;) is a taxpaying entity for federal
    income tax purposes. A net long-term tax liability of $853,000
    was recorded when TeacherWeb was acquired in June 2008. As a
    result of TeacherWeb&#146;s operations since the acquisition,
    the Company has recorded $247,000 of federal and state income
    tax benefit in 2008. No federal income tax expense was
    recognized in 2006 or 2007. TeacherWeb has approximately
    $364,000 of net operating loss carryforwards for federal and
    state income tax purposes as of December&#160;31, 2008. The
    Company is also subject to sales, use and franchise taxes and,
    as such, has recorded these expenses in the accompanying
    financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Concentrations of Credit Risk</I>&#160;&#151; Financial
    instruments that are subject to concentrations of credit risk
    are cash and cash equivalents and accounts receivable.
    Management believes its contract acceptance, billing, and
    collection policies are adequate to minimize potential credit
    risk. The Company continuously evaluates the credit worthiness
    of its customers&#146; financial condition and generally does
    not require collateral.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company maintains deposits with major financial institutions
    which exceed federally insured limits. Management periodically
    assesses the financial condition of the institution and believes
    that any possible credit risk is minimal. The Company has not
    experienced any loss from such risk.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock-Based Compensation Expense</I>&#160;&#151; The Company
    has adopted FASB Statement No.&#160;123(R), <I>Accounting for
    Stock-Based Compensation</I>. Among other items, FASB Statement
    No.&#160;123(R) requires companies to record compensation
    expense for share-based awards issues to employees and directors
    in exchange for services provided. The amount of the
    compensation expense is based on the estimated fair value of the
    awards on their grant dates determined by the board of managers
    (see Note&#160;12)&#160;and is recognized over the required
    service periods. The share-based awards include members&#146;
    interest in Class&#160;B and C shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Accounting for Derivatives and Hedging
    Activities</I>&#160;&#151; The Company&#146;s overall risk
    management strategy includes utilizing an interest rate swap
    agreement. The Company managed its exposure to rate variability
    on the floating interest rate paid on its borrowing by entering
    into an interest rate swap agreement with a notional amount
    totaling $45,500,000, of which $45,500,000 and $40,500,000
    remained in effect as of December&#160;31, 2008 and
    June&#160;30, 2009, respectively. Beginning in 2009, the
    notional amount of the interest rate swap began decreasing in
    periodic amounts, and will decrease to a notional amount of
    $30,500,000 at the December 2010 termination date. The Company
    swapped a floating rate payment based on three month
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-14
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    London InterBank Offered Rate (LIBOR) for a fixed rate of 4.035%
    in order to minimize the variability in expected future cash
    flows due to interest rate movements on its LIBOR-based variable
    rate debt.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has not designated the swap as a hedge in accordance
    with FASB Statement No.&#160;133, <I>Accounting for Derivative
    Instruments and Hedging Activities</I>, as amended. The fair
    value of the interest rate swap is recorded in its consolidated
    balance sheet as &#147;interest rate swap&#148; and changes in
    the fair value of the swap in its consolidated statements of
    income as &#147;derivative loss.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net Income per Share</I>&#160;&#151; Net income per equity
    share is computed under the provisions of FASB
    Statement&#160;No.&#160;128, <I>Earnings Per Share</I>. Basic
    income per share is computed using net income and the weighted
    average number of shares outstanding. Diluted earnings per share
    reflect the weighted average number of shares outstanding plus
    any potentially dilutive securities outstanding during the
    period. Class&#160;A,
    <FONT style="white-space: nowrap">Class&#160;A-2,</FONT>
    Class&#160;B, and Class&#160;C shares are entitled to earnings
    based on a priority established in the Company&#146;s LLC
    agreement. The Class&#160;A shares are entitled to a return of
    capital and a preferred return before any other class of share
    is entitled to earnings. Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2</FONT>
    shares are entitled to 100% of the earnings for the years ended
    December&#160;31, 2007 and 2008, and the six months ended
    June&#160;30, 2008 and 2009, to the extent such shares were
    issued. For the years ended December&#160;31, 2006, 2007, and
    2008, and for the six months ended June&#160;30, 2008 and 2009,
    there were no potential dilutive securities to the Class&#160;A
    shares. Prior to the purchase transaction, the Predecessor was a
    limited partnership containing two equal partners and the
    Predecessor reported earnings per partner by dividing net income
    for the year ended December&#160;31, 2006 by two.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">3.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">FAIR
    VALUE MEASUREMENTS</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the first quarter of 2008, the Company adopted the provisions
    of FASB Statement No.&#160;157, <I>Fair Value Measurements,
    </I>for financial assets and liabilities. FASB Statement
    No.&#160;157 became effective for financial assets and
    liabilities on January&#160;1, 2008. FASB Statement No.&#160;157
    defines fair value, thereby eliminating inconsistencies in
    guidance found in various prior accounting pronouncements and
    increases disclosures surrounding fair value calculations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    FASB Statement No.&#160;157 establishes a three-tiered fair
    value hierarchy that prioritizes inputs to valuation techniques
    used in fair value calculations. The three levels of input are
    defined as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Level&#160;1&#160;&#151; Unadjusted quoted market prices for
    identical assets or liabilities in active markets that the
    Company has the ability to access.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Level&#160;2&#160;&#151; Quoted prices for similar assets or
    liabilities in active markets; quoted prices for identical or
    similar assets or liabilities in inactive markets; or valuations
    based on models where the significant inputs are observable
    (interest rates, yield curves, prepayment speeds, default rates,
    loss severities, etc.) or can be corroborated by observable
    market data.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Level&#160;3&#160;&#151; Valuations based on models where
    significant inputs are not observable. The unobservable inputs
    reflect the Company&#146;s own assumptions about the assumptions
    that market participants would use.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    FASB Statement No.&#160;157 requires the Company to maximize the
    use of observable inputs and minimize the use of unobservable
    inputs. If a financial instrument uses inputs that fall in
    different levels of the hierarchy, the instrument will be
    categorized based upon the lowest level of input that is
    significant to the fair value calculation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s interest rate swap is valued in the market
    using discounted cash flow techniques. These techniques
    incorporate Level&#160;1 and Level&#160;2 inputs such as
    interest rates. These market inputs are utilized in the
    discounted cash flow calculation considering the
    instrument&#146;s term, notional amount, discount
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-15
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    rate, and credit risk. Significant inputs to the derivative
    valuation for interest rate swap are observable in the active
    markets and are classified as Level&#160;2 in the hierarchy.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes assets and liabilities measured
    at fair value on a recurring basis as of December&#160;31, 2008,
    as required by FASB Statement No.&#160;157 (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="60%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 1</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 2</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 3</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Assets&#160;&#151; cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,206
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Liabilities&#160;&#151; interest rate swap
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,988
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,988
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes assets and liabilities measured
    at fair value on a recurring basis as of June&#160;30, 2009
    (unaudited), as required by FASB Statement No.&#160;157 (amounts
    in thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="60%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 1</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 2</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 3</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Assets&#160;&#151; cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Liabilities&#160;&#151; interest rate swap
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The fair value of the Company&#146;s long-term debt is estimated
    based on the quoted market prices for the same or similar issues
    or on the current rates offered to the Company for debt of the
    same remaining maturities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The carrying amounts and estimated fair values of the
    Company&#146;s financial instrument that is not reflected in the
    financial statement at fair value is as follows (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="35%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2009 (Unaudited)</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Fair Value</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Fair Value</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Fair Value</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Term loan
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    70,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    70,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    69,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    70,047
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    68,426
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    67,912
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">4.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">RECENT
    ACCOUNTING PRONOUNCEMENTS</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2007, the FASB issued FASB Statement
    No.&#160;141(R), <I>Business Combinations, </I>which establishes
    principles and requirements for how an acquirer recognizes and
    measures in its financial statements the identifiable assets
    acquired, the liabilities assumed, non-controlling interest in
    the acquire, and the goodwill acquired. FASB Statement No.
    141(R) also establishes disclosure requirements to enable the
    evaluation of the nature and financial effects of the business
    combination. FASB Statement No.&#160;141(R) is effective for
    financial statements issued for fiscal years beginning after
    December&#160;15, 2008, and early adoption is prohibited. The
    implementation of this standard did not have a material effect
    on the Company&#146;s financial condition or results of
    operations. The Company will assess the impact of this standard
    when and if future acquisitions occur.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In February 2008, the FASB issued FASB Staff Position
    (&#147;FSP&#148;)
    <FONT style="white-space: nowrap">FAS&#160;No.&#160;157-2,</FONT>
    Effective Date for FASB Statement No.&#160;157. This FSP
    permitted the delayed application of FSAB Statement No.&#160;157
    for all nonrecurring fair value measurements of nonfinancial
    assets and nonfinancial liabilities until fiscal years beginning
    after November&#160;15, 2008. The adoption did not have a
    material impact on the Company&#146;s consolidated financial
    statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2008, the FASB issued FASB Statement No.&#160;161,
    <I>Disclosures about Derivative Instruments and Hedging
    Activities&#160;&#151; an amendment of FASB Statement 133</I>.
    FASB Statement No.&#160;161 requires enhanced disclosures about
    a company&#146;s derivative and hedging activities. These
    enhanced disclosures will discuss (a)&#160;how and why a company
    uses derivative instruments, (b)&#160;how derivative instruments
    and related hedged items are accounted for under FASB Statement
    No.&#160;133 and its related interpretations, and (c)&#160;how
    derivative instruments and related hedged items affect a
    company&#146;s financial position, results of operations, and
    cash flows. FASB Statement No.&#160;161 is effective for fiscal
    years beginning on or after November&#160;15, 2008, with
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-16
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    earlier adoption allowed. The implementation of this standard
    did not have a material effect on the Company&#146;s
    consolidated financial condition or results of operations for
    interim periods beginning January&#160;1, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In April 2008, the FASB issued FSP
    <FONT style="white-space: nowrap">No.&#160;142-3,</FONT>
    <I>Determination of the Useful Life of Intangible Assets</I>.
    FSP FASB
    <FONT style="white-space: nowrap">No.&#160;142-3</FONT>
    amends the factors that should be considered in developing
    renewal or extension assumptions used to determine the useful
    life of a recognized intangible asset under FASB Statement
    No.&#160;142. FSP FASB
    <FONT style="white-space: nowrap">No.&#160;142-3</FONT>
    is effective for fiscal years beginning after December&#160;15,
    2008. The implementation of this standard did not have a
    material effect on the Company&#146;s consolidated financial
    condition or results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In April 2009, the FASB issued FSP
    <FONT style="white-space: nowrap">No.&#160;FAS&#160;107-1</FONT>
    and APB
    <FONT style="white-space: nowrap">28-1,</FONT>
    Interim Disclosures about Fair Value of Financial Instruments
    (&#147;FSP
    <FONT style="white-space: nowrap">FAS&#160;107-1</FONT>
    and APB
    <FONT style="white-space: nowrap">28-1&#148;).</FONT>
    This FSP amends FASB Statement&#160;No.&#160;107, Disclosures
    about Fair Value of Financial Instruments, to require
    disclosures about fair value of financial instruments in interim
    as well as in annual financial statements. This FSP also amends
    Accounting Principles Board (&#147;APB&#148;) Opinion
    No.&#160;28, Interim Financial Reporting, to require those
    disclosures in all interim financial statements. FSP
    <FONT style="white-space: nowrap">No.&#160;FAS&#160;107-1</FONT>
    and APB <FONT style="white-space: nowrap">28-1</FONT>
    were effective for interim and annual periods ending after
    June&#160;15, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009, the FASB issued FASB Statement&#160;No.&#160;165,
    Subsequent Events (&#147;SFAS&#160;165&#148;). This statement
    provides general standards for the accounting and reporting of
    subsequent events that occur between the balance sheet date and
    issuance of financial statements. The statement requires the
    issuer to recognize the effects, if material, of subsequent
    events in the financial statements if the subsequent event
    provides additional evidence about conditions that existed as of
    the balance sheet date. The issuer must also disclose the date
    through which subsequent events have been evaluated and the
    nature of any non-recognized subsequent events. Non-recognized
    subsequent events include events that provide evidence about
    conditions that did not exist as of the balance sheet date, but
    which are of such a nature that they must be disclosed to keep
    the financial statements from being misleading. The statement is
    effective for interim and annual periods ending after
    June&#160;15, 2009. The Company has considered subsequent events
    through September&#160;2, 2009 related to these financial
    statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issues FASB Statement No.&#160;168,
    <I>The &#147;FASB Accounting Standards Codification&#148; and
    the Hierarchy of Generally Accepted Accounting
    Principles&#160;&#151; a replacement of FASB Statement
    No.&#160;162</I>. FASB Statement 168 provides for the FASB
    Accounting Standards Codification (the &#147;Codification&#148;)
    to become the single official source of authoritative,
    nongovernmental U.S.&#160;generally accepted accounting
    principles (GAAP). The Codification did not change GAAP but
    reorganizes the literature. FASB Statement 168 is effective for
    interim and annual periods ending after September&#160;15, 2009.
    The Company will begin to use the Codification when referring to
    GAAP in its financial statements for the third quarter of 2009.
    This will not have an impact on the Company&#146;s financial
    position, results of operations of cash flows.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-17
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">5.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">PROPERTY
    AND EQUIPMENT</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property and equipment as of December&#160;31, 2007, 2008 and
    June&#160;30, 2009, consisted of the following (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="67%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of June&#160;30,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    650
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,534
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,896
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture and fixtures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    129
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    284
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    302
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Office equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    363
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    471
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Leasehold improvements
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    47
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    894
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,241
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,742
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accumulated depreciation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (101
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (459
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (961
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    793
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,782
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,781
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Depreciation expense was $71,004, $101,165, and $358,334 for the
    periods ending December&#160;31, 2006, 2007 and 2008,
    respectively. For the six months ended June&#160;30, 2008 and
    2009 (unaudited), depreciation expense was $136,279 and
    $501,689, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">6.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ACQUISITIONS</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On June&#160;30, 2008, the Company purchased 100% of the capital
    stock of TeacherWeb. TeacherWeb provides web-based templates for
    educators to quickly and easily create classroom, school and
    district websites. The transaction was recorded as a business
    combination with the resulting assets acquired and liabilities
    assumed being recorded at fair value determined on the
    information available and assumptions as to future operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The purchase price was allocated as follows (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Working capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (17
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net long-term deferred tax liability
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (853
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,380
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net acquired assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,514
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash paid to sellers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transaction costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total cash paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,658
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Issuance of
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total purchase price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Goodwill
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,894
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The fair value of the 286,882
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    issued during the third quarter of 2008 in connection with the
    TeacherWeb acquisition was determined based on management&#146;s
    estimated average enterprise value of the Company at the time of
    the acquisition and its impact on its existing participation
    shares distribution thresholds.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-18
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">7.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">INTANGIBLE
    ASSETS AND GOODWILL</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has recorded intangible assets in connection with
    the purchase transaction on January&#160;10, 2007. Intangible
    assets are amortized on a straight-line basis over their
    estimated useful lives. Intangible assets as of
    December&#160;31, 2007, are as follows (dollars in thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amortization<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Gross<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Period<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(Months)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amortization</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Net</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Finite-lived intangible assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island customer relationships
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,620
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,325
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,295
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island technical development/program content
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (244
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,256
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Indefinite-lived intangible assets&#160;&#151; Study Island
    trade name
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,569
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,551
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Amortization expense for the year ended December&#160;31, 2007,
    was $1,568,666, and $81,741, $1,325,387 and $161,538 of
    amortization expense were included in cost of revenue, sales and
    marketing and content development expense, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the Company has recorded intangible assets in
    connection with its June&#160;30, 2008, acquisition of
    TeacherWeb. Intangible assets as of December&#160;31, 2008, are
    as follows (dollars in thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amortization<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Gross<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Period<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(Months)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amortization</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Net</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Finite-lived intangible assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island customer relationships
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,620
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,687
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,933
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island technical development/program content
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (494
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    TeacherWeb customer relationships
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,130
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (213
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,917
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Indefinite-lived intangible assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island trade name
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    TeacherWeb trade name
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    19,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,394
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    16,106
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Amortization expense for the year ended December&#160;31, 2008
    was $1,825,000, and $84,000, $1,575,000 and $166,000 of
    amortization expense were included in cost of revenue, sales and
    marketing and content development expense, respectively.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-19
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Intangible assets as of June&#160;30, 2009 (unaudited), are as
    follows (dollars in thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amortization<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Gross<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Period<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(Months)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amortization</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Net</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Finite-lived intangible assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island customer relationships
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,620
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,368
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,252
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island technical development/program content
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (619
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,881
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    TeacherWeb customer relationships
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,130
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (426
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,704
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Indefinite-lived intangible assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Study Island trade name
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    TeacherWeb trade name
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    19,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,413
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,087
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Amortization expense for the six month period ended
    June&#160;30, 2009 (unaudited) was $1,019,000, and $42,000,
    $894,000 and $83,000 of amortization expense was included in
    cost of revenue, sales and marketing and content development
    expense, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The estimated amortization expense for each of the five
    succeeding years and thereafter is as follows (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="66%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="15%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,019
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,825
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,825
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Thereafter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,879
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,879
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,837
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The weighted-average remaining useful lives of the finite
    intangibles assets as of December&#160;31, 2008 and
    June&#160;30, 2009 (unaudited) is 8.42 and 7.80&#160;years,
    respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The changes in the carrying amount of goodwill are as follows
    (amounts in thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="89%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance at January&#160;1, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Goodwill acquired during year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94,373
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance at December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94,373
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Goodwill acquired during year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,894
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    103,267
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There was no change in goodwill during the six months ended
    June&#160;30, 2009 (unaudited).
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-20
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">8.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">CREDIT
    FACILITY</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On November&#160;16, 2007, the Company entered into an
    $80,000,000 credit facility with General Electric Capital
    Corporation, as agent, composed of a $70,000,000 term loan and a
    $10,000,000 revolving credit facility, which expires in November
    2013. The proceeds of the term loan and $4,928,688 in cash were
    used to pay a distribution of $73,222,670 to the Class&#160;A
    shareholders and debt financing costs of $1,706,018. The term
    loan bears interest at rates based upon either a base rate or
    LIBOR rate plus an applicable margin (3.25% as of June&#160;30,
    2009, 3.25% as of December&#160;31, 2008, and 4.00% as of
    December&#160;31, 2007, respectively, in each case for a
    LIBOR-based term loan) determined based on the Company&#146;s
    leverage ratio. Amounts under the revolving credit facility can
    be borrowed and repaid, from time to time, at the Company&#146;s
    option, subject to the pro forma compliance with certain
    financial covenants. Subsequently, the Company received a refund
    of $215,270 in 2008 of the amount previously paid.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The term loan and revolving credit facility require us to
    maintain certain financial ratios, including a leverage ratio
    (based on the ratio of consolidated indebtedness, net of cash
    and cash equivalents, to consolidated EBITDA, defined in the
    credit facility as consolidated net income adjusted by adding
    back interest expense, taxes, depreciation expenses,
    amortization expenses and certain other non-recurring or
    otherwise permitted fees and charges), an interest coverage
    ratio (based on the ratio of consolidated EBITDA to consolidated
    interest expense, as defined in the credit facility) and a fixed
    charge coverage ratio (based on the ratio of consolidated EBITDA
    to fixed charges).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The term loan and the revolving credit facility contain certain
    affirmative and restrictive covenants that, among other things,
    add limitations for the incurrence of additional indebtedness,
    liens on property, sale and leaseback transactions, investments,
    loans and advances, merger or consolidation, asset sales,
    acquisitions, dividends, transactions with affiliates,
    prepayments of any other indebtedness, modifications of our
    organizational documents and restrictions on our subsidiaries.
    The credit facility contains events of default that are
    customary for similar facilities and transactions, including a
    cross-default provision with respect to any other indebtedness
    and an event of default that would be triggered by a change of
    control, as defined in the credit facility, and which is not
    expected to be triggered by this offering. As of June&#160;30,
    2009, December&#160;31, 2008 and December&#160;31, 2007, we were
    in compliance with all covenants. The credit facility is secured
    on a first-priority basis by security interests (subject to
    permitted liens) in substantially all of the assets of the
    Company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has the right to optionally prepay its borrowings
    under the term loan or the revolving credit facility, subject to
    the procedures set forth in the credit facility. The Company may
    be required to make prepayments on its borrowings under the term
    loan or the revolving credit facility if it receives proceeds as
    a result of any asset sales, additional debt issuances, events
    of loss or if we have excess cash flow. A mandatory prepayment
    of the term loan is required within five business days after the
    earlier of the actual or required delivery date of the
    compliance certificate each fiscal year, in an amount equal to
    (i)&#160;75% of excess cash flows (as defined by the credit
    agreement) if the leverage ratio as of the last day of the
    fiscal year is greater than 4:00 to 1:0, (ii)&#160;50% of excess
    cash flows if the leverage ratio as of the last day of the
    fiscal year is less than or equal to 4:00 to 1:0 but greater
    than 3:25 to 1:0, or (iii)&#160;25% of excess cash flow if the
    leverage ratio as of the last day of the fiscal year is less
    than or equal to 3.25 to 1.0. No mandatory prepayment is
    required if the leverage ratio is less than or equal to 2.50 to
    1.0 on the last day of the fiscal year. No mandatory prepayments
    were required for the second quarter ended June&#160;30, 2009
    and the year ended December&#160;31, 2007. The Company did make
    a mandatory prepayment of $524,301 during the second quarter of
    2009 related to the excess cash flow generated for the year
    ended December&#160;31, 2008.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-21
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Principal payments due over the next five years and beyond as of
    December&#160;31, 2008 and June&#160;30, 2009, are as follows
    (amounts in thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="35%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of June&#160;30, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Calendar Year</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Term</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Revolving</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Term</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Revolving</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65,976
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65,976
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,426
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,426
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: current maturities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (700
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (700
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (700
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (700
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    68,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    68,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    67,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    67,726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">9.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">OTHER
    LONG-TERM LIABILITY</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Financial Accounting Standards Board issued FASB
    Interpretation No.&#160;48, &#147;Accounting for Uncertainty in
    Income Taxes&#160;- an Interpretation of FASB Statement
    No.&#160;109&#148;, or FIN&#160;48, which clarifies the
    accounting and disclosure for uncertainty in tax positions, as
    defined. The Company adopted the provisions of FIN&#160;48 as of
    January&#160;1, 2007, and has analyzed filing positions in all
    of the federal and state jurisdictions where the Company is
    required to file income tax returns, as well as all open tax
    years in these jurisdictions. The Company is not a taxpaying
    entity for federal income tax purposes and in certain state tax
    jurisdictions due to the Company&#146;s partnership status. As a
    partnership, income of the Company is taxed to the partners on
    their individual federal income tax returns. The Company&#146;s
    policy is to recognize interest accrued related to unrecognized
    tax benefits and penalties as income tax expense.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon adoption, the Company did not identify uncertain tax
    positions that resulted in a material effect on the
    Company&#146;s financial condition, results of operations, or
    cash flow. The Company did not record a cumulative effect
    adjustment related to the adoption of FIN&#160;48. In addition,
    no material reserves for uncertain income tax positions were
    identified or recorded pursuant to FIN&#160;48 as of
    December&#160;31, 2007 and December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the six months ended June&#160;30, 2009 (unaudited), the
    Company recorded $230,000 of unrecognized tax benefits including
    approximately $7,000 of accrued gross interest expense related
    to a state tax filing position. The Company is not currently
    under examination in any federal or state income tax
    jurisdiction. The Company does not expect that unrecognized tax
    benefits will significantly change in the following
    12&#160;month period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">10.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">COMMITMENTS
    AND CONTINGENCIES</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company is obligated, as lessee, under noncancelable
    operating leases for office space expiring on February&#160;28,
    2010, and May&#160;31, 2012. In addition, the Company is
    obligated, as lessee, under a noncancelable operating lease for
    office equipment in July 2011. As of December&#160;31, 2008 and
    June&#160;30, 2009,
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the future minimum payments required under all operating leases
    with terms in excess of one year are as follows (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="66%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="15%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>As of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    462
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    271
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    415
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    434
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    414
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    424
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    176
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    176
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,467
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,305
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rent expense for the years ended December&#160;31, 2006, 2007
    and 2008, was $85,896, $248,159, and $423,723, respectively.
    Rent expense was $203,127 and $270,060 for the six months ended
    June&#160;30, 2008 and 2009 (unaudited), respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">11.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">MEMBERS&#146;
    EQUITY</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Archipelago Learning Holdings, LLCs&#146; capital structure
    consists of Class&#160;A Shares,
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;Shares,</FONT>
    Class&#160;B Shares and Class&#160;C Shares. The terms of the
    shares are governed by the Amended and Restated Limited
    Liability Company (the &#147;LLC Agreement&#148;), as amended.
    On January&#160;10, 2007, 109,545,064 Class&#160;A Shares were
    issued to the Company&#146;s private-equity sponsor and other
    investors. Class&#160;B Shares and Class&#160;C Shares are held
    by employees of the Company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In February 2007 the Board of Managers of Archipelago Learning
    Holdings, LLC adopted the 2007 Equity Compensation Plan (the
    &#147;Plan&#148;). Under the terms of the Plan, eligible
    participants, as determined by the Board, may receive grants of
    equity interests of the Archipelago Learning Holdings, LLC in
    the form of Class&#160;B Shares and Class&#160;C Shares, which
    together are defined as the Participation Shares. The purpose of
    the Plan is to compensate employees and consultants of the
    Company. Under the terms and provisions of the LLC Agreement the
    Participation Shares are to be considered profits interests in
    the Company and each holder of a share is considered a member of
    the Company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of Class&#160;B Shares and Class&#160;C Shares may not
    sell, transfer, assign, pledge or otherwise dispose of their
    shares other than as permitted pursuant to the Participation
    Stock Agreement. In the event of a planned sale of shares by the
    Company&#146;s private-equity sponsor, holders of vested
    Participation Shares must participate in the planned sale.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A separate capital account must be maintained for each member.
    No member can be required to pay the Company or another member
    if their capital accounts are negative.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Distributions</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All members shall be entitled to receive distributions,
    including distributions in connection with the liquidation,
    dissolution or winding up of the Company, when and as determined
    by the Board of Managers. Distributions under the plan are
    determined by the Board and are subject to various thresholds
    outlined in the LLC Agreement. No holder of a Participation
    Share is eligible to receive distributions under the Agreement
    until the holders of the Class&#160;A and Class&#160;A-2 Shares
    have received distributions equal to 100% of their capital
    contributions and the holders of Class&#160;A shares have
    received a preferred return of 12% per annum on the Class&#160;A
    capital contributions. Once these distributions have been made,
    the Class&#160;A Shareholders and holders of
    <FONT style="white-space: nowrap">Class&#160;A-2</FONT>
    and vested Participant Shares become eligible to receive
    distributions subject to cumulative percent limitations. No
    distribution can be made on account of a Class&#160;B Share that
    has not yet vested. Amounts that would otherwise be paid on
    account of these shares are credited to the member&#146;s
    capital
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-23
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    accounts and will be distributed once these shares have vested.
    The Class&#160;C Shares are not entitled to any portion of any
    distributions until the holders of the Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;Shares</FONT>
    have received certain multiples of cash-based returns on their
    respective investment in the Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;Shares.</FONT>
    If any unvested shares are forfeited such amounts will be
    distributed to the Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2</FONT>
    Members, pro rata, in proportion to the number of shares held by
    Class&#160;A and
    <FONT style="white-space: nowrap">Class&#160;A-2</FONT>
    Members.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Voting
    Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All holders of Class&#160;A and
    <FONT style="white-space: nowrap">A-2&#160;Shares</FONT>
    are entitled to one vote for each Class&#160;A and
    <FONT style="white-space: nowrap">A-2&#160;Shares</FONT>
    outstanding and the holders of the Participation Shares do not
    have any voting rights.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2006, the Predecessor withdrew $6,354,291 from the
    business as a return of capital, and during 2007 withdrew
    $846,483 prior to the change in control to the Successor.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2007, the Predecessor received a distribution of
    $1,178,000 representing a return of capital. The Company also
    made a $74,752,848 distribution to Class&#160;A members as a
    return of capital that was primarily funded from the proceeds of
    the term loan. The Company did not make any tax distributions to
    the members as the Company was in a tax loss position for the
    years ended December&#160;31, 2007 and December&#160;31, 2008.
    During the six months ended June&#160;30, 2009 (unaudited), the
    Company made a tax distribution of $768,126 to its members.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2007, 5,720,692 Class&#160;B and 5,720,692 Class&#160;C
    shares were issued to employees of the Company. During 2008,
    456,336 Class&#160;B and Class&#160;C shares were issued to
    employees of the Company. In addition, during 2008, 821,588
    Class&#160;B shares and 273,864 Class&#160;C shares were
    forfeited. In January 2009, 673,287&#160;shares of Class&#160;B
    shares and 673,287&#160;shares of Class&#160;C shares were
    issued to employees of the Company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2008, 286,882 of
    <FONT style="white-space: nowrap">Class&#160;A-2&#160;shares</FONT>
    were issued for $750,000 in connection with the TeacherWeb, Inc.
    acquisition (see Note&#160;6).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">12.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">STOCK-BASED
    COMPENSATION</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Awards under the Plan to eligible participants are based upon
    the terms and conditions determined by the Board as set forth by
    the Board in a grant instrument. These terms may include such
    factors as the number of shares awarded and the dates and events
    on which any or all of the awards vest or become non-forfeitable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the awards granted in 2007, 2008 and 2009, each Class&#160;B
    Share vests 20% on each anniversary as specified in the
    Participation Stock Agreement and the Class&#160;C Shares vest
    upon grant date. For each Class&#160;B Share granted to a
    participant, the participant also received one Class&#160;C
    Shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All Class&#160;C shares and any unvested Class&#160;B shares
    will be forfeited if any participant is no longer an employee of
    the Company. All Class&#160;B and Class C shares will be
    forfeited if the participant&#146;s employment is terminated by
    the Company for cause or by the participant without good reason.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under FASB Statement No.&#160;123(R) and in accordance with the
    guidance in the AICPA Practice Aid <I>Valuation of
    Privately-Held-Company Equity Securities Issued as
    Compensation</I>, the estimated fair value of the awards was
    determined by the Company&#146;s board of managers after taking
    into account (i)&#160;the nature of the business and the history
    of the Company&#146;s business from its inception, (ii)&#160;the
    economic outlook in general and the condition and outlook of the
    Company&#146;s industry, (iii)&#160;the book value of the stock
    and financial condition of the Company, (iv)&#160;Company&#146;s
    earning capacity, (v)&#160;Company&#146;s dividend-paying
    capacity, (vi)&#160;Company&#146;s goodwill or other intangible
    value, (vii)&#160;prior sales of the Company&#146;s equity and
    the size of the block to be valued and (viii)&#160;the market
    price of stock in corporations engaged in similar businesses,
    whose stock is actively traded in a free and open market. The
    Company valued the awards primarily based on a comparison to
    similar businesses, business ownership interests or securities
    that have been sold. The
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-24
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Company evaluated pricing multiples derived from transactions of
    companies in the same or a similar line of business and also
    derived from market prices of stocks of companies in the same or
    similar line of business as the Company. The Company focused on
    transactions that involved companies engaged in educational
    services that were technology based.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The assumptions used in calculating the fair value of
    equity-based payment awards represent management&#146;s best
    estimates. As with all estimates, these estimates involve
    inherent uncertainties and the application of management
    judgment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Based on the above factors the Company has determined the fair
    value of its Class&#160;B and Class&#160;C shares granted in
    2007 was $0.31 and $0.05, respectively, Class&#160;B and
    Class&#160;C shares granted in 2008 was $0.29 and $0.07,
    respectively and Class&#160;B and Class&#160;C shares granted in
    2009 was $0.26 and $0.06, respectively. The Company recognizes
    compensation expense as the fair value of the awards on the
    grant date over the service period of the awards which is
    generally the vesting period. The Company did not apply a
    forfeiture rate to the Class&#160;B shares as these awards are
    only granted to a few key executives.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table presents the status of the Company&#146;s
    unvested Class&#160;B Participation Shares for the periods
    indicated (amounts in thousands, except per share data):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Grant-Date<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Nonvested Shares</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Fair Value</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested&#160;&#151; December&#160;31, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,721
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vested
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested&#160;&#151; December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,721
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.29
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vested
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,089
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (822
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested&#160;&#151; December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    673
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.26
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vested
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,180
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested&#160;&#151; June&#160;30, 2009 (unaudited)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,759
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the stock-based compensation
    expense included in the related statements of income line items
    (amounts in thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="26%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Six Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Six Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(Successor)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Predecessor)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    52
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    81
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    513
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    127
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Content development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    355
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    187
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-25
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ARCHIPELAGO
    LEARNING HOLDINGS, LLC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2007 and 2008 and June&#160;30, 2009
    (unaudited), there was approximately $1,428,449, $967,206 and
    $971,147, respectively of unrecognized stock-based compensation
    expense related to non-vested Participation Shares that is
    expected to be recognized over a weighted average period of
    4.03, 3.18 and 2.95&#160;years, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">13.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">EMPLOYEE
    BENEFIT PLANS</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company provides a 401(k) defined contribution retirement
    plan for all eligible employees who meet certain eligibility
    requirements, including performing three months of service. The
    Company matches 100% up to 3% of employee contributions, plus
    50% of the amount of the participant&#146;s deferred
    compensation that exceeds 3% of the participant&#146;s
    compensation, but not in excess of 5% of the participant&#146;s
    compensation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Participants are 100% vested in the portion of the plan
    representing employee and employer safe harbor match
    contributions. Other employer-match contributions vest over five
    years. For the years ended December&#160;31, 2006, 2007, and
    2008, the Company made contributions of $55,932, $114,371, and
    $238,458, respectively, under this plan. For the six months
    ended June&#160;30, 2008 and 2009 (unaudited), the Company made
    contributions of $89,633 and $194,609, respectively, under this
    plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">14.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">SEGMENT
    INFORMATION</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company operates as one operating segment as the principal
    business activity relates to providing subscription-based online
    educational services. The chief operating decision maker, the
    Chief Executive Officer, evaluates the performance of the
    Company based upon consolidated results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">15.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">RELATED-PARTY
    TRANSACTIONS</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has made the following payments to certain related
    parties who are significant shareholders or businesses that are
    controlled by significant shareholders as follows (amounts in
    thousands):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="41%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>June&#160;30, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Predecessor)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    <B>(Successor)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Management or advisory services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    342
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    60
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Purchases of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    344
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    178
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">16.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">SUBSEQUENT
    EVENTS</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On August&#160;14, 2009, the Company and two related parties
    entered into a unit purchase agreement with Edline Holdings,
    Inc. (&#147;Edline&#148;), a company that offers web-based
    technological solutions for schools and educators. The Company
    purchased 285,601 Series&#160;A shares of Edline for
    $2.9&#160;million, which represents 7.1% of Edline&#146;s
    outstanding Series&#160;A shares. Edline also borrowed
    $2.1&#160;million from the Company pursuant to a five-year
    promissory note, which bears interest at 9.5% per annum and
    requires semi-annual interest-only payments. Upon completion of
    the unit purchase agreement, the Company received transaction
    fees totaling $0.2&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ******
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-26
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 85%; margin-left: 7%"><!-- BEGIN PAGE WIDTH -->

<DIV style="font-size: 16pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 2pt solid #000000"></DIV><!-- callerid=999 iwidth=432 length=0 -->

<DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=432 length=0 -->

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#160;&#160;&#160;&#160;&#160;Through and
    including&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009 (the
    25<SUP style="font-size: 85%; vertical-align: top">th</SUP> day

    after the date of this prospectus), all dealers effecting
    transactions in these securities, whether or not participating
    in this offering, may be required to deliver a prospectus. This
    is in addition to the dealers&#146; obligation to deliver a
    prospectus when acting as underwriters and with respect to their
    unsold allotments or subscriptions.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt">Shares</FONT></B>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="d68999d6899904.gif" alt="Archipelago Logo"><B><FONT style="font-size: 16pt">
    </FONT></B>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">Archipelago Learning,
    Inc.</FONT></B>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">Common Stock</FONT></B>
</DIV>

<DIV style="margin-top: 36pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 20%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=90 -->

<DIV style="margin-top: 14pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>PROSPECTUS</B>
</DIV>

<CENTER style="font-size: 1pt; width: 20%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV><B><FONT style="font-size: 16pt">BofA
    Merrill Lynch</FONT></B>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV>
<DIV style="margin-top: 126pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>, 2009</B>
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 0pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=432 length=0 -->

<DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 2pt solid #000000"></DIV><!-- callerid=999 iwidth=432 length=0 -->

<DIV style="margin-top: 15pt; font-size: 1pt">&nbsp;</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 85%; margin-left: 7%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PART&#160;II<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INFORMATION
    NOT REQUIRED IN PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ITEM&#160;13.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">OTHER
    EXPENSES OF ISSUANCE AND DISTRIBUTION.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The expenses, other than underwriting commissions, expected to
    be incurred by Archipelago Learning, Inc. (the
    &#147;Registrant&#148;) in connection with the issuance and
    distribution of the securities being registered under this
    Registration Statement are estimated to be as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="92%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Securities and Exchange Commission Registration Fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,185
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Financial Industry Regulatory Authority, Inc. Filing Fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    NYSE or Nasdaq Listing Fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Printing and Engraving
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Legal Fees and Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accounting Fees and Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blue Sky Fees and Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transfer Agent and Registrar Fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Miscellaneous
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ITEM&#160;14.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">INDEMNIFICATION
    OF DIRECTORS AND OFFICERS.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;145 of the Delaware General Corporation Law, or
    DGCL, provides that a corporation may indemnify any person who
    was or is a party or is threatened to be made a party to any
    threatened, pending or completed action, suit or proceeding
    whether civil, criminal, administrative or investigative (other
    than an action by or in the right of the corporation by reason
    of the fact that he is or was a director, officer, employee or
    agent of the corporation, or is or was serving at the request of
    the corporation as a director, officer, employee or agent of
    another corporation, partnership, joint venture, trust or other
    enterprise, against expenses (including attorneys&#146; fees)),
    judgments, fines and amounts paid in settlement actually and
    reasonably incurred by him in connection with such action, suit
    or proceeding if he acted in good faith and in a manner he
    reasonably believed to be in or not opposed to the best
    interests of the corporation, and, with respect to any criminal
    action or proceeding, had no reasonable cause to believe his
    conduct was unlawful. Section&#160;145 further provides that a
    corporation similarly may indemnify any such person serving in
    any such capacity who was or is a party or is threatened to be
    made a party to any threatened, pending or completed action or
    suit by or in the right of the corporation to procure a judgment
    in its favor by reason of the fact that he is or was a director,
    officer, employee or agent of the corporation or is or was
    serving at the request of the corporation as a director,
    officer, employee or agent of another corporation, partnership,
    joint venture, trust or other enterprise, against expenses
    (including attorney&#146;s fees) actually and reasonably
    incurred in connection with the defense or settlement of such
    action or suit if he acted in good faith and in a manner he
    reasonably believed to be in or not opposed to the best
    interests of the corporation and except that no indemnification
    shall be made in respect of any claim, issue or matter as to
    which such person shall have been adjudged to be liable to the
    corporation unless and only to the extent that the Delaware
    Court of Chancery or such other court in which such action or
    suit was brought shall determine upon application that, despite
    the adjudication of liability but in view of all of the
    circumstances of the case, such person is fairly and reasonably
    entitled to indemnity for such expenses which the Delaware Court
    of Chancery or such other court shall deem proper.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Registrant&#146;s Bylaws authorize the indemnification of
    our officers and directors, consistent with Section&#160;145 of
    the Delaware General Corporation Law, as amended. The Registrant
    intends to enter into indemnification agreements with each of
    its directors and executive officers. These agreements, among
    other things, will require the Registrant to indemnify each
    director and executive officer to the fullest extent permitted
    by Delaware law, including indemnification of expenses such as
    attorneys&#146; fees, judgments, fines
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and settlement amounts incurred by the director or executive
    officer in any action or proceeding, including any action or
    proceeding by or in right of us, arising out of the
    person&#146;s services as a director or executive officer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Reference is made to Section&#160;102(b)(7) of the Delaware
    General Corporation Law, or DGCL, which enables a corporation in
    its original certificate of incorporation or an amendment
    thereto to eliminate or limit the personal liability of a
    director for violations of the director&#146;s fiduciary duty,
    except (i)&#160;for any breach of the director&#146;s duty of
    loyalty to the corporation or its stockholders, (ii)&#160;for
    acts or omissions not in good faith or which involve intentional
    misconduct or a knowing violation of law, (iii)&#160;pursuant to
    Section&#160;174 of the DGCL, which provides for liability of
    directors for unlawful payments of dividends of unlawful stock
    purchase or redemptions or (iv)&#160;for any transaction from
    which a director derived an improper personal benefit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Reference is also made to Section&#160;145 of the DGCL, which
    provides that a corporation may indemnify any person, including
    an officer or director, who is, or is threatened to be made,
    party to any threatened, pending or completed legal action, suit
    or proceeding, whether civil, criminal, administrative or
    investigative, other than an action by or in the right of such
    corporation, by reason of the fact that such person was an
    officer, director, employee or agent of such corporation or is
    or was serving at the request of such corporation as a director,
    officer, employee or agent of another corporation or enterprise.
    The indemnity may include expenses (including attorneys&#146;
    fees), judgments, fines and amounts paid in settlement actually
    and reasonably incurred by such person in connection with such
    action, suit or proceeding, provided such officer, director,
    employee or agent acted in good faith and in a manner he
    reasonably believed to be in, or not opposed to, the
    corporation&#146;s best interest and, for criminal proceedings,
    had no reasonable cause to believe that his conduct was
    unlawful. A Delaware corporation may indemnify any officer or
    director in an action by or in the right of the corporation
    under the same conditions, except that no indemnification is
    permitted without judicial approval if the officer or director
    is adjudged to be liable to the corporation. Where an officer or
    director is successful on the merits or otherwise in the defense
    of any action referred to above, the corporation must indemnify
    him against the expenses that such officer or director actually
    and reasonably incurred.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Registrant expects to maintain standard policies of
    insurance that provide coverage (i)&#160;to its directors and
    officers against loss rising from claims made by reason of
    breach of duty or other wrongful act and (ii)&#160;to the
    Registrant with respect to indemnification payments that it may
    make to such directors and officers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The proposed form of Underwriting Agreement to be filed as
    Exhibit&#160;1.1 to this Registration Statement provides for
    indemnification to the Registrant&#146;s directors and officers
    by the underwriters against certain liabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ITEM&#160;15.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">RECENT
    SALES OF UNREGISTERED SECURITIES.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On August&#160;4, 2009, Archipelago Learning, Inc., a Delaware
    corporation was formed. Archipelago Learning Holdings, LLC
    purchased 100&#160;shares of common stock of Archipelago
    Learning, Inc. for $1,000 in a transaction exempt from
    registration pursuant to Section&#160;4(2) of the Securities Act
    of 1933, as it was a transaction by an issuer that did not
    involve a public offering of securities.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ITEM&#160;16.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">EXHIBITS&#160;AND
    FINANCIAL STATEMENT SCHEDULES.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="4%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (a)<I>&#160;</I>
</TD>
    <TD align="left">
    <I>Exhibits</I>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description of Exhibits</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Underwriting Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Certificate of Incorporation of Archipelago Learning,
    Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Bylaws of Archipelago Learning, Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .3
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Second Amended and Restated Limited Liability Company Agreement
    of Study Island Holdings, LLC.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Common Stock Certificate.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Shareholders Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Registration Rights Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Opinion of Weil, Gotshal &#038; Manges LLP.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    2007 Equity Compensation Plan.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Participation Share Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Indemnification Agreement between Archipelago Holdings,
    Inc. and each of its directors and executive officers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .4*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Form of Archipelago Learning, Inc. 2009 Omnibus Incentive Plan.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .5
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and Cameron Chalmers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .6
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and Cameron Chalmers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .7
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Cameron Chalmers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .8
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and David Muzzo.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .9
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and David Muzzo.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .10
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and David Muzzo.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .11
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of January 28, 2007, between
    Study Island, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .12
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    First Amendment to Employment Agreement, dated as of March 16,
    2007, between Study Island, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .13
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .14
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of August&#160;31, 2009, between
    Archipelago Learning Holdings, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .15
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of May 22, 2007, between Study
    Island, LLC and James Walburg.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .16
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and James Walburg.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .17
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of August&#160;31, 2009, between
    Archipelago Learning Holdings, LLC and James Walburg.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .18
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of August&#160;28, 2009, between
    Archipelago Learning, Inc. and Julie Huston.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .19
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Employment Agreement, dated as of September 15, 2008, between
    Study Island, LLC and Ray Lowrey.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .20
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Ray Lowrey.
</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description of Exhibits</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .21
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Credit Agreement, dated as of November 16, 2007, by and among
    Study Island, LLC, the other persons designated as credit
    parties from time to time, General Electric Capital Corporation,
    as a lender and as agent for all lenders, NewStar Financial,
    Inc., as syndication agent, the other parties thereto as lenders
    and GE Capital Markets, Inc. and NewStar Financial, Inc., as
    joint lead arrangers and joint bookrunners.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .22
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Amendment No. 1 to Credit Agreement, dated as of May 21, 2008.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .23
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Amendment No. 2 to Credit Agreement, dated as of February 18,
    2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .24
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Amendment No. 3 to Credit Agreement, dated as of April 30, 2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .25
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Amendment No. 4 to Credit Agreement, dated as of May 15, 2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .26
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Amendment No. 5 to Credit Agreement, dated as of
    September&#160;2, 2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .27
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Guaranty and Security Agreement, dated as of November 16, 2007,
    by and among Study Island, LLC, General Electric Capital
    Corporation and the other grantors party thereto.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    21
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    List of Subsidiaries of Archipelago Learning, Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Consent of Deloitte &#038; Touche LLP, Independent Registered
    Public Accounting Firm relating to Archipelago Learning, Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Consent of Deloitte &#038; Touche LLP, Independent Registered
    Public Accounting Firm, relating to Archipelago Learning
    Holdings, LLC.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Consent of Weil, Gotshal &#038; Manges LLP (included in the
    opinion filed as Exhibit 5.1 hereto).
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    24
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Power of Attorney (included on signature page).
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    *&#160;</TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="4%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (b)<I>&#160;</I>
</TD>
    <TD align="left">
    <I>Financial Statement Schedules</I>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">ITEM&#160;17.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">UNDERTAKINGS.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The undersigned registrant hereby undertakes to provide to the
    underwriters at the closing specified in the underwriting
    agreements, certificates in such denominations and registered in
    such names as required by the underwriters to permit prompt
    delivery to each purchaser.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act of 1933&#160;may be permitted to directors,
    officers and controlling persons of the registrant pursuant to
    the provisions referenced in Item&#160;14 of this registration
    statement, or otherwise, the registrant has been advised that in
    the opinion of the Securities and Exchange Commission such
    indemnification is against public policy as expressed in the
    Securities Act and is, therefore, unenforceable. In the event
    that a claim for indemnification against such liabilities (other
    than the payment by the registrant of expenses incurred or paid
    by a director, officer, or controlling person of the registrant
    in the successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered hereunder, the
    registrant will, unless in the opinion of its counsel the matter
    has been settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question of whether such
    indemnification by it is against public policy as expressed in
    the Securities Act and will be governed by the final
    adjudication of such issue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule&#160;430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule&#160;424(b)(1) or (4)&#160;or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;For the purpose of determining any liability under the
    Securities Act of 1933, each post-effective amendment that
    contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    II-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SIGNATURES</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, the
    registrant has duly caused this registration statement to be
    signed on its behalf by the undersigned, thereunto duly
    authorized, in the City of Dallas, State of Texas, on the 3rd
    day of September, 2009.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ARCHIPELAGO LEARNING, INC.
</DIV>

<DIV style="margin-top: 48pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="49%"></TD>
    <TD width="4%"></TD>
    <TD width="47%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    By:&#160;
</TD>
    <TD align="left">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Tim
    McEwen</DIV>
</TD>
</TR>

</TABLE>

<DIV style="font-size: 2pt; margin-left: 53%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=0 -->

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Name:&#160;&#160;&#160;&#160;&#160;Tim McEwen
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="53%"></TD>
    <TD width="8%"></TD>
    <TD width="39%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    Title:&#160;
</TD>
    <TD align="left">
    President and Chief Executive Officer
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">POWER OF
    ATTORNEY</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
    constitutes and appoints each of Tim McEwen and James Walburg,
    or either of them, each acting alone, his true and lawful
    attorney-in-fact and agent, with full power of substitution and
    resubstitution, for such person and in his name, place and
    stead, in any and all capacities, to sign this Registration
    Statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    (including all pre-effective and post-effective amendments and
    registration statements filed pursuant to Rule&#160;462 under
    the Securities Act of 1933), and to file the same, with all
    exhibits thereto, and other documents in connection therewith,
    with the Securities and Exchange Commission, granting unto said
    attorneys-in-fact and agents, each acting alone, full power and
    authority to do and perform each and every act and thing
    requisite and necessary to be done in and about the premises, as
    fully to all intents and purposes as he might or could do in
    person, hereby ratifying and confirming that any such
    attorney-in-fact and agent, or his substitute or substitutes,
    may lawfully do or cause to be done by virtue hereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, this
    registration statement has been signed by the following persons
    in the capacities on the 3rd day of September, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="2%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="47%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="47%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Signature</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Title</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 6pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 10pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Tim
    McEwen</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=228 length=0 -->Tim
    McEwen
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    President, Chief Executive Officer and Director<BR>
    (Principal Executive Officer)
</TD>
</TR>
<TR valign="bottom" style="line-height: 10pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;James
    Walburg</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=228 length=0 -->James
    Walburg
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Executive Vice President, Chief Financial<BR>
    Officer and Secretary<BR>
    (Principal Financial and Accounting Officer)
</TD>
</TR>
<TR valign="bottom" style="line-height: 10pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Cameron
    Chalmers</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=228 length=0 -->Cameron
    Chalmers
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Vice President and Director
</TD>
</TR>
<TR valign="bottom" style="line-height: 10pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;David
    Muzzo</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=228 length=0 -->David
    Muzzo
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Vice President and Director
</TD>
</TR>
<TR valign="bottom" style="line-height: 10pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;David
    Phillips</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=228 length=0 -->David
    Phillips
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom" style="line-height: 10pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Michael
    Powell</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=228 length=0 -->Michael
    Powell
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom" style="line-height: 10pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Peter
    Wilde</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=228 length=0 -->Peter
    Wilde
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Chairman
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXHIBIT&#160;INDEX</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description of Exhibits</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Underwriting Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Certificate of Incorporation of Archipelago Learning,
    Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Bylaws of Archipelago Learning, Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .3
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amended and Restated Limited Liability Company Agreement
    of Study Island Holdings, LLC.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Common Stock Certificate.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Shareholders Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Registration Rights Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Opinion of Weil, Gotshal &#038; Manges LLP.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2007 Equity Compensation Plan.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Participation Share Agreement.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Indemnification Agreement between Archipelago Holdings,
    Inc. and each of its directors and executive officers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .4*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Archipelago Learning, Inc. 2009 Omnibus Incentive Plan.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .5
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and Cameron Chalmers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .6
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and Cameron Chalmers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .7
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Cameron Chalmers.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .8
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and David Muzzo.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .9
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and David Muzzo.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .10
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and David Muzzo.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .11
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of January 28, 2007, between
    Study Island, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .12
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amendment to Employment Agreement, dated as of March 16,
    2007, between Study Island, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .13
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .14
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of August&#160;31, 2009, between
    Archipelago Learning Holdings, LLC and Timothy McEwen.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .15
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of May 22, 2007, between Study
    Island, LLC and James Walburg.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .16
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and James Walburg.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .17
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of August&#160;31, 2009, between
    Archipelago Learning Holdings, LLC and James Walburg.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .18
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of August&#160;28, 2009, between
    Archipelago Learning, Inc. and Julie Huston.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .19
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement, dated as of September 15, 2008, between
    Study Island, LLC and Ray Lowrey.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .20
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Ray Lowrey.
</TD>
</TR>
</TABLE>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description of Exhibits</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .21
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Credit Agreement, dated as of November 16, 2007, by and among
    Study Island, LLC, the other persons designated as credit
    parties from time to time, General Electric Capital Corporation,
    as a lender and as agent for all lenders, NewStar Financial,
    Inc., as syndication agent, the other parties thereto as lenders
    and GE Capital Markets, Inc. and NewStar Financial, Inc., as
    joint lead arrangers and joint bookrunners.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .22
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amendment No. 1 to Credit Agreement, dated as of May 21, 2008.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .23
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amendment No. 2 to Credit Agreement, dated as of February 18,
    2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .24
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amendment No. 3 to Credit Agreement, dated as of April 30, 2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .25
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amendment No. 4 to Credit Agreement, dated as of May 15, 2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .26
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amendment No. 5 to Credit Agreement, dated as of
    September&#160;2, 2009.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .27
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Guaranty and Security Agreement, dated as of November 16, 2007,
    by and among Study Island, LLC, General Electric Capital
    Corporation and the other grantors party thereto.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    21
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    List of Subsidiaries of Archipelago Learning, Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Deloitte &#038; Touche LLP, Independent Registered
    Public Accounting Firm, relating to Archipelago Learning, Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
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</TD>
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    Consent of Deloitte &#038; Touche LLP, Independent Registered
    Public Accounting Firm, relating to Archipelago Learning
    Holdings, LLC.
</TD>
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    Consent of Weil, Gotshal &#038; Manges LLP (included in the
    opinion filed as Exhibit 5.1 hereto).
</TD>
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    .1
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    Power of Attorney (included on signature page).
</TD>
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sv1
Table of Contents
As filed with the Securities and Exchange Commission on
    September 3, 2009
Registration
    No. 333-
SECURITIES AND EXCHANGE
    COMMISSION
Washington, D.C.
    20549
Form S-1
REGISTRATION STATEMENT UNDER
    THE SECURITIES ACT OF 1933
Archipelago Learning,
    Inc.
(Exact name of registrant as
    specified in its charter)
Delaware
(State or Other Jurisdiction
    of
Incorporation or Organization)
8200
(Primary Standard
    Industrial
Classification Code Number)
27-0767387
(I.R.S. Employer
Identification No.)
Archipelago Learning,
    Inc.
3400 Carlisle Street,
    Suite 345
Dallas, Texas
    75204-1257
(800) 419-3191
(Address, Including Zip Code,
    and Telephone Number, Including Area Code, of Registrant's
    Principal Executive Offices)
Tim McEwen
Chief Executive
    Officer
Archipelago Learning,
    Inc.
3400 Carlisle Street,
    Suite 345
Dallas, Texas 75204
(800) 419-3191
(Name, Address, Including Zip
    Code, and Telephone Number, Including Area Code, of Agent For
    Service)
Copies to:
Alexander D. Lynch, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000 (Phone)
(212) 310-8007 (Fax)
Valerie Ford Jacob, Esq.
Steven G. Scheinfeld, Esq.
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, New York 10004
(212) 859-8000 (Phone)
(212) 859-4000 (Fax)
Approximate date of commencement of proposed sale to the
    public:
As soon as practicable after the
    effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule 415 under the Securities Act of 1933, as amended (the
    "Securities Act"), check the following
    box.
o
If this Form is filed to register additional securities for an
    offering pursuant to Rule 462(b) under the Securities Act,
    please check the following box and list the Securities Act
    registration statement number of the earlier effective
    registration statement for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(c) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.
o
Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated filer
    or a smaller reporting company. See the definitions of
    "accelerated filer," "large accelerated
    filer" and "smaller reporting company" in
    Rule 12b-2 of the Exchange Act.
Large
    accelerated
    filer
o
Accelerated
    filer
o
Non-accelerated
    filer
þ
Smaller reporting company
o
CALCULATION
    OF REGISTRATION FEE
Title of Each Class of
Proposed Maximum
Amount of
Securities to be Registered
Aggregate Offering Price(1)(2)
Registration Fee
Common Stock, $0.001 par value
$75,000,000
$4,185
(1)
Estimated solely for the purpose of
    calculating the registration fee in accordance with
    Rule 457(o) promulgated under the Securities Act of 1933.
    Includes shares subject to the underwriters' over-allotment
    option, if any.
(2)
Includes shares of common stock
    that may be purchased by the underwriters to cover
    over-allotments, if any.
The Registrant hereby amends this Registration Statement on
    such date or dates as may be necessary to delay its effective
    date until the Registrant shall file a further amendment which
    specifically states that this Registration Statement shall
    thereafter become effective in accordance with Section 8(a)
    of the Securities Act of 1933 or until the Registration
    Statement shall become effective on such date as the Commission,
    acting pursuant to said Section 8(a), may determine.
Table of Contents
EXPLANATORY
    NOTE
Prior to this offering, we conducted our business through
    Archipelago Learning Holdings, LLC, formerly known as Study
    Island Holdings, LLC, and its subsidiaries. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, Archipelago Learning, Inc.,
    a newly formed Delaware corporation, will consummate a corporate
    reorganization whereby Archipelago Learning Holdings, LLC will
    become a wholly owned subsidiary of Archipelago Learning, Inc.
    See "Corporate Reorganization" in the accompanying
    prospectus for a description of the corporate reorganization.
    This registration statement, including the prospectus contained
    herein, includes the audited consolidated financial statements,
    consolidated selected financial and other data and other
    financial information of Archipelago Learning Holdings, LLC,
    which holds all of our operating subsidiaries and after the
    corporate reorganization and this offering will be a direct
    subsidiary of Archipelago Learning, Inc., as well as the audited
    balance sheet of Archipelago Learning, Inc. Prior to the
    corporate reorganization and this offering, Archipelago
    Learning, Inc. held no material assets and did not engage in any
    operations.
Table of Contents
The
information in this prospectus is not complete and may be
changed. Neither we nor the selling stockholders may sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated
    September 3, 2009
PROSPECTUS
Shares
Archipelago Learning,
    Inc.
Common Stock
This is the initial public offering of our common stock. We are
    offering           shares
    of the common stock offered by this prospectus, and the selling
    stockholders, which include entities affiliated with members of
    our board of directors, are
    offering           shares
    of common stock. We will not receive any proceeds from the sale
    of the shares to be offered by the selling stockholders.
We expect the public offering price to be between
    $      and
    $      per share. Currently, no public
    market exists for the shares. After pricing the offering, we
    expect that the shares will be listed on either the New York
    Stock Exchange or The NASDAQ Stock Market LLC under the symbol
    "ARCL."
Investing in our common stock involves risks that are
    described in the "Risk Factors" section beginning on
    page 13 of this prospectus.
Per Share
Total
Public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to us
$
$
Proceeds, before expenses, to the selling stockholders
$
$
The underwriters may also purchase up to an
    additional           shares
    from us, and up to an
    additional           shares
    from the selling stockholders, at the public offering price,
    less the underwriting discount, within 30 days from the
    date of this prospectus to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state
    securities commission has approved or disapproved of these
    securities or determined if this prospectus is truthful or
    complete. Any representation to the contrary is a criminal
    offense.
The shares will be ready for delivery on or
    about          ,
    2009.
BofA Merrill Lynch
The date of this prospectus
    is          ,
    2009
TABLE OF
    CONTENTS
Page
Prospectus Summary
1
Risk Factors
13
Forward-Looking Statements
31
Providence Equity Transactions
33
Corporate Reorganization
34
Use of Proceeds
36
Dividend Policy
36
Capitalization
37
Dilution
38
Selected Historical Consolidated Financial
    Data
40
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
43
Industry and Market Data
64
Business
65
Management
79
Compensation Discussion and Analysis
84
Certain Relationships and Related Person
    Transactions
100
Principal and Selling Stockholders
104
Description of Capital Stock
106
Description of Material Indebtedness
110
Shares Eligible for Future Sale
112
Certain Material U.S. Federal Income Tax
    Considerations
114
Underwriting
117
Legal Matters
124
Experts
124
Where You Can Find Additional Information
124
Index to Financial Statements
F-1
EX-3.3
EX-10.1
EX-10.2
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-10.12
EX-10.13
EX-10.14
EX-10.15
EX-10.16
EX-10.17
EX-10.18
EX-10.19
EX-10.20
EX-10.21
EX-10.22
EX-10.23
EX-10.24
EX-10.25
EX-10.26
EX-10.27
EX-21.1
EX-23.1
EX-23.2
You should rely only on the information contained in this
    prospectus. We have not, the selling stockholders have not and
    the underwriters have not authorized any other person to provide
    you with different information. If anyone provides you with
    different or inconsistent information, you should not rely on
    it. We are not, the selling stockholders are not and the
    underwriters are not making an offer to sell these securities in
    any jurisdiction where the offer or sale is not permitted. You
    should assume that the information appearing in this prospectus
    is only accurate as of the date on the front cover of this
    prospectus. Our business, financial condition, results of
    operations and prospects may have changed since that date.
"Archipelago Learning," "Study Island,"
    "TeacherWeb," "Northstar Learning" and their
    respective logos are our trademarks. Solely for convenience, we
    refer to our trademarks in this prospectus without the
tm
and
®
symbols,

    but such references are not intended to indicate, in any way,
    that we will not assert, to the fullest extent under applicable
    law, our rights to our trademarks. Other service marks,
    trademarks and trade names referred to in this prospectus are
    the property of their respective owners. As indicated in this
    prospectus, we have included market and industry data obtained
    from industry publications and other sources. See "Industry
    and Market Data."
Table of Contents
PROSPECTUS
    SUMMARY
This section summarizes key information contained elsewhere
    in this prospectus and is qualified in its entirety by the more
    detailed information and consolidated financial statements
    included elsewhere in this prospectus. You should carefully
    review the entire prospectus, including the risk factors, the
    consolidated financial statements and the notes thereto, and the
    other documents to which this prospectus refers before making an
    investment decision. Prior to this offering, we conducted our
    business through Archipelago Learning Holdings, LLC, formerly
    known as Study Island Holdings, LLC, and its subsidiaries.
    Immediately prior to the consummation of this offering, and in
    accordance with and as contemplated by the limited liability
    company agreement of Archipelago Learning Holdings, LLC,
    Archipelago Learning, Inc., a newly formed Delaware corporation,
    will consummate a corporate reorganization whereby Archipelago
    Learning Holdings, LLC will become a wholly owned subsidiary of
    Archipelago Learning, Inc. Archipelago Learning, Inc. will act
    as a holding company for our business after the corporate
    reorganization, and its shares of common stock are offered
    hereby. Unless the context requires otherwise, references in
    this prospectus to "Archipelago Learning,"
    "we," "us," "our company" or
    similar terms refer to Archipelago Learning, Inc. and its
    subsidiaries, after giving effect to our corporate
    reorganization. Prior to the corporate reorganization and this
    offering, Archipelago Learning, Inc., held no material assets
    and did not engage in any operations.
Our
    Company
Archipelago Learning is a leading subscription-based online
    education company. We provide standards-based instruction,
    practice, assessments and productivity tools that improve the
    performance of educators and students via proprietary web-based
    platforms. Study Island, our core product line, helps students
    in Kindergarten through 12th grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the
2008-2009
school year, Study Island products were utilized by
    approximately 8.3 million students in over 19,200 schools
    in 50 states who answered over 2.8 billion of our
    practice questions. We recently began offering classroom and
    school website portals, digital lockers and teacher productivity
    tools through our TeacherWeb services and online postsecondary
    programs through our Northstar Learning product line.
Study Island combines rigorous content that is highly customized
    to specific standards in reading, math, science and social
    studies with interactive features and games that engage students
    and reinforce and reward learning achievement. Our programs also
    enable educators to track student performance in real-time to
    address individual student learning gaps, while allowing
    administrators to monitor student progress and measure teacher
    effectiveness. Through continued product expansion, viral
    word-of-mouth marketing and a proven sales organization, Study
    Island has the opportunity to grow by increasing sales to
    existing school customers as well as adding new school customers.
We capitalize on two significant trends in the education market:
    (1) an increased focus on higher academic standards and
    educator accountability for student achievement, which has led
    to periodic assessment in the classroom to gauge student
    learning and inform instruction, and (2) the increased
    availability and utilization of web-based technologies to
    enhance and supplement teacher instruction, engage today's
    technology-savvy learners and improve student outcomes.
Our
    Market Opportunity
The U.S. educational system, consisting of K-12 and
    postsecondary education, collectively includes approximately
    74 million students and approximately $1 trillion in
    educational expenditures according to the National Center for
    Education Statistics, or NCES. We operate primarily in the
    U.S. K-12 education market, which consists of approximately
    54 million students in more than 112,600 schools according
    to Market Data Retrieval, or MDR. The U.S. K-12 school
    system has over 90,600 public schools in over 15,200 school
    districts and county and regional centers and more than 22,000
    private and Catholic schools, according to MDR.
1
Table of Contents
We believe that we have a growing market opportunity as a result
    of an increased emphasis on school and teacher accountability,
    legislative developments, including the reauthorization of the
    Elementary and Secondary Education Act, commonly referred to as
    No Child Left Behind, or NCLB, which emphasizes annual student
    assessment, as well as increased access to computers and the
    internet in and out of the classroom. In addition, schools use a
    variety of supplemental materials to augment the core
    curriculum, provide remediation and enrichment, and offer
    additional learning opportunities in the classroom and at home.
    An estimated $11.5 billion was spent on the K-12
    instructional materials market in 2008, according to Outsell,
    Inc., a research and advisory firm focused on the publishing,
    information, and education industries, or Outsell. In 2009,
    Outsell projects that spending on instructional content will
    grow by about 2-4%, and spending on assessment, tutoring and
    test preparation services will grow by about 4.8-5.2%. Between
    2010 and 2012 the overall market is expected to grow at an
    annual compounded growth rate of 5.5% according to Outsell.
We believe increased accountability, including the need for
    school districts and states to meet the requirements of NCLB and
    other legislative developments, combined with the increased
    availability and utilization of web-based technologies by
    teachers, students and administrators has resulted in decreased
    spending on traditional print-based and software-based
    supplemental materials and increased spending on innovative
    online programs that offer functionality and real-time
    assessment and reporting not provided by traditional solutions.
Our
    Competitive Strengths
We believe the following are our key competitive strengths:
•
Customized, Standards-Based Content.
Study
    Island offers online, standards-based instruction, practice and
    assessments for K-12 built from applicable standards in each of
    the 50 states, as well as Washington, DC. In addition,
    Northstar Learning offers instruction, practice, assessments and
    test preparation for the GED and allied health licensure exams,
    as well as developmental studies in college readiness
    English/language arts and mathematics.
•
Real-time Student Tracking, Built-in Remediation and
    Enrichment.
We provide real-time reporting on
    student achievement, allowing educators to quickly identify
    learning gaps and provide targeted instruction and practice.
    Study Island also provides students with immediate feedback and
    explanations and, when required, remediation content designed to
    build foundational skills in order to accelerate students to
    grade-level proficiency.
•
Engaging, Fun and Easy to Use for
    Students.
Our products utilize a simple,
    graphical user interface that is intuitive and easy to use. In
    addition, our Study Island products incorporate games and
    rewards in order to make learning fun and engaging for students.
    By engaging students and providing them with the tools they need
    to succeed, we enable them to take control of their own
    learning, boost their confidence and keep them interested in
    using our products, while creating a culture of academic success.
•
Accessible, Dynamic Web-based Platform.
Our
    products are delivered entirely online so they can be used by
    teachers and students on computers wherever internet access is
    available. Our programs are compatible with existing school and
    school district enterprise systems and require no additional
    software, no installation or maintenance and no extensive
    implementation or training.
•
High Impact, Low Cost Solution.
By providing a
    single, comprehensive solution for core subjects across a wide
    range of grade levels, Study Island eliminates the need for
    schools to have multiple vendors or systems, saving them both
    time and money. In addition, at an average annual price per
    student per subject of $3.00, or $10.00 per student for all
    subjects, our products offer customers a compelling value
    proposition compared to traditional print, software and online
    alternatives provided by large education publishers.
•
Management Team with Strong Education Industry
    Expertise.
Members of our senior management team
    have extensive experience in the education industry and in
    serving the
2
Table of Contents
academic community. Our Chief Executive Officer Tim McEwen, who
    has approximately 34 years of experience in the industry,
    and our Chief Financial Officer James Walburg, who has
    27 years of public company accounting and finance
    experience, both joined us in 2007. Our Chief Technology Officer
    Ray Lowrey, who has approximately 14 years of experience in
    the education industry, joined us in 2008. Under their
    leadership, the number of school customers and registered
    student users of our Study Island products have increased from
    approximately 7,800 and 3.0 million, respectively, in 2006,
    to over 19,200 and 8.3 million, respectively, in
    June 2009.
Key
    Attributes of Our Business Model
We believe the following are the key attributes of our business
    model:
•
High Revenue Visibility and Strong Cash Flow
    Generation.
We believe we have an attractive
    business model characterized by a visible recurring revenue
    stream and high profit margins. In addition, we believe our low
    capital expenditure requirements and up-front subscription
    payments by customers result in strong cash flow generation and
    high returns on invested capital.
•
Scalability and Flexibility.
We continue to
    scale our business by increasing our product offerings, our
    sales and the number of students, teachers and schools using our
    products without incurring significant incremental expense. Our
    content development process, our flexible sales model and our
    cost-effective centralized, hosted online delivery platform
    allow us to minimize our costs as we expand our product
    offerings and our business.
•
Powerful, Demand-Driven Sales &
    Marketing.
Our Study Island products are often
    introduced into the classroom by principals or teachers, rather
    than mandated by district-level administrators. In addition to
    this viral demand for our products and services, we have a 113
    member team of specialized sales and marketing professionals. As
    a result of this strategy, we set the price points for our K-8
    products at levels that fall within a school principal's
    discretionary budget or that can be funded by individual
    teachers or through parent fundraising efforts.
Our
    Growth Strategy
•
Expand the Number of Schools Using Our Study Island
    Products.
In the
2008-2009
school year, our Study Island products were used by over 19,200
    schools throughout all 50 states and Washington, DC,
    representing approximately 17.1% of the over 90,600 public and
    22,000 private and Catholic K-12 schools in the United States.
    We believe that there is a significant opportunity to expand the
    number of schools that use Study Island, particularly the number
    of high schools. Our high school products generally have higher
    price points than our K-8 products and accounted for
    approximately 10% of our service revenue in 2008.
•
Increase Revenue per School.
In many schools
    that we serve, we have the opportunity to sell additional core
    grade level and subject area products, as well as new products,
    such as our benchmark assessments and graphic novel reading
    intervention, to teachers who already subscribe to one or more
    of our products. We also market TeacherWeb to our Study Island
    customer base.
•
Develop New Products and Enhance our Online
    Platform.
We continually develop new Study Island
    products, as well as new features and functionality for our
    online platform, to address student needs and teacher requests.
    These new products also provide additional revenue
    opportunities. For instance, we intend to introduce new high
    school oriented products, including reading and math remediation
    products, core subject end of course and exit exam preparation,
3
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advanced placement exam preparation, PSAT, SAT, ACT and other
    test preparation, and high school courses for credit and credit
    recovery.
•
Expand Into New Related Markets.
We believe
    there is a significant opportunity to grow sales of our products
    and services through the introduction of new products for the
    postsecondary market. We launched our Northstar Learning product
    line in April 2009 to enter this market, utilizing our content
    development, instruction, exam preparation and assessment
    expertise. In addition, we believe there are additional market
    opportunities outside of the United States and outside of the
    traditional school setting. We are planning to introduce our
    Study Island products in Canada in the fourth quarter of 2009.
    We are exploring the opportunities to introduce our Study Island
    products in other international markets and to sell our products
    directly to parents as well as expanding our sales efforts to
    public libraries, school libraries and homeschool settings.
•
Pursue Acquisitions and Strategic
    Relationships.
Since 2007, we have sought
    acquisitions and strategic relationships that expand our product
    and service offerings and provide additional revenue
    opportunities. We intend to continue to pursue acquisitions that
    have products, services and businesses that are compatible with
    our Archipelago Learning brand identity, culture and corporate
    mission. In addition, we believe our large student audience of
    over 8 million K-12 students provides a significant
    opportunity to generate cross-sales of other appropriate,
    teacher- and parent-approved products to this valuable
    demographic.
Risks
    Associated with Our Business
Our business is subject to numerous risks, as discussed more
    fully in the section entitled "Risk Factors" beginning
    on page 13 of this prospectus, which you should read in its
    entirety. In particular:
•
Most of our customers are public schools, which rely on state,
    local and federal funding. If any state, local or federal
    funding is materially reduced, our public school customers may
    no longer be able to afford to purchase our products and
    services;
•
If national educational standards and assessments are adopted,
    or if existing metrics for applying state standards are revised,
    new competitors could more easily enter our markets or the
    demands in the markets we currently serve may change;
•
If Congress does not reauthorize the Elementary and Secondary
    Education Act, commonly referred to as NCLB since the 2001
    reauthorization, or other legislation does not continue to
    mandate state educational standards and annual assessments,
    demand for our products and services could be materially
    adversely affected;
•
Our recent rapid growth, the recent introduction of a number of
    our products and services and our entry into new markets make it
    difficult for us to evaluate our current and future business
    prospects, and we may be unable to effectively manage our growth
    and new initiatives;
•
The recent ongoing adoption of online learning in established
    education markets makes it difficult for us to evaluate our
    current and future business prospects. If web-based education
    fails to achieve widespread acceptance by students, parents,
    teachers, schools and other institutions, our growth and
    profitability may materially suffer;
•
Our service revenue is primarily generated by sales of
    subscriptions to our Study Island products over the term of the
    subscription. Our customer renewal rates for Study Island,
    Teacher Web and Northstar Learning are difficult to predict and
    declines in our sales of Study Island products or in renewal
    rate may materially adversely affect our business and results of
    operations; and
4
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•
Our Study Island products are predominantly purchased by
    individual schools, and any decisions at the district or state
    level to use the products and services of one of our
    competitors, or to limit or reduce the use of web-based
    educational products, could materially adversely affect our
    ability to attract and retain customers.
Principal
    Stockholders
In January 2007, investment funds affiliated with Providence
    Equity Partners, together with Cameron Chalmers and David Muzzo
    (our founders and vice presidents) and MHT-SI, LP, acquired 100%
    of the voting equity interests in Archipelago Learning Holdings,
    LLC (formerly known as Study Island Holdings, LLC), the parent
    of Archipelago Learning, LLC (formerly known as Study Island,
    LLC), which subsequently acquired substantially all of the
    assets of Study Island, LP, our predecessor. As a result of
    these transactions, affiliates of Providence Equity Partners own
    approximately 77.2% of our voting equity interests, Cameron
    Chalmers and David Muzzo together own approximately 18.2% of our
    voting equity interests divided equally between them, and
    MHT-SI, LP owns approximately 4.6% of our voting equity
    interests. For a more detailed description of the acquisition,
    see "Providence Equity Transactions."
Corporate
    Reorganization
Prior to this offering, Archipelago Learning Holdings, LLC and
    its subsidiaries conducted our business. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, the holders of shares of
    Archipelago Learning Holdings, LLC, and certain of their
    affiliates will enter into transactions with Archipelago
    Learning, Inc. pursuant to which direct or indirect holders of
    Class A,
Class A-2,
Class B and Class C shares will exchange their shares
    for common stock, restricted stock and restricted stock unit
    awards. The purpose of this corporate reorganization is to
    reorganize our corporate structure so that the top tier entity
    in our corporate structure - the entity whose common stock
    is being offered to the public in this offering - is a
    corporation rather than a limited liability company and so that
    our existing investors will directly own our common stock.
5
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Our ownership and corporate structure immediately following the
    Corporate Reorganization are set forth in the following chart:
Our
    Executive Offices
Prior to the Corporate Reorganization, we operated our business
    through Archipelago Learning Holdings, LLC, a Delaware limited
    liability company, and its subsidiaries. Immediately prior to
    the consummation of this offering, we will consummate the
    Corporate Reorganization and operate our business through a
    newly formed Delaware corporation, Archipelago Learning, Inc.
    Our principal executive offices are located at 3400 Carlisle
    Street, Suite 345, Dallas, TX 75204, and our telephone
    number is
(800) 419-3191.
We have a website at www.archipelagolearning.com. The
    information that appears on our website is not part of, and is
    not incorporated into, this prospectus.
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Table of Contents
The
    Offering
Common stock offered by us
shares.
Common stock offered by the selling stockholders
shares.
Total offering
shares.
Common stock to be outstanding after this offering
shares.
Over-allotment option
The underwriters have an option to purchase a maximum
    of           additional
    shares of common stock to cover over-allotments. Of
    the           shares
    subject to the
    option,           shares
    would be sold by the selling stockholders
    and           shares
    would be sold by us. The underwriters can exercise this option
    at any time within 30 days from the date of this prospectus.
Use of proceeds
We estimate that the net proceeds to us from this offering,
    after deducting underwriting discounts and estimated offering
    expenses, will be approximately
    $      million, assuming the
    shares are offered at $      (the
    midpoint of the price range set forth on the cover of this
    prospectus). We intend to use the net proceeds of this offering
    for general corporate purposes. We will not receive any proceeds
    from the sale of shares by the selling stockholders. See
    "Use of Proceeds."
Dividend policy
We do not anticipate paying any dividends on our common stock in
    the foreseeable future. See "Dividend Policy."
Risk factors
Investing in our common stock involves a high degree of risk.
    See "Risk Factors" beginning on page 13 of this
    prospectus for a discussion of factors you should carefully
    consider before investing in our common stock.
Proposed NYSE or Nasdaq symbol
"ARCL"
Unless otherwise indicated, the number of shares of common stock
    to be outstanding after this offering:
•
excludes           shares
    of our common stock issuable upon exercise of stock options that
    we intend to grant at the time of this offering, at an exercise
    price equal to the initial public offering price;
    and           shares
    of our common stock, restricted stock and restricted stock unit
    awards reserved for future grants under our 2009 Omnibus
    Incentive Plan.
Unless otherwise indicated, the information in this prospectus:
•
gives effect to the Corporate Reorganization;
•
gives effect to our amended and restated certificate of
    incorporation and our amended and restated bylaws, which will be
    in effect immediately prior to the consummation of this offering;
•
assumes no exercise of the underwriters' option to purchase
    up
    to          
    additional shares from us and up
    to           additional
    shares from the selling shareholders; and
•
assumes an initial public offering price of
    $      per share, the midpoint of the
    price range set forth on the cover of this prospectus.
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Table of Contents
Summary
    Historical Consolidated Financial and Other Data
The following table sets forth the summary historical and
    adjusted consolidated financial data for Archipelago Learning
    Holdings, LLC for the periods and at the dates indicated. We
    derived the summary consolidated financial data presented below
    for the years ended December 31, 2008, December 31,
    2007 and December 31, 2006 from the audited consolidated
    financial statements of Archipelago Learning Holdings, LLC
    included elsewhere in this prospectus. We derived the summary
    consolidated financial data for the six months ended
    June 30, 2009 and June 30, 2008 and as of
    June 30, 2009 from the unaudited consolidated financial
    statements of Archipelago Learning Holdings, LLC included
    elsewhere in this prospectus. We have prepared the unaudited
    consolidated financial information set forth below on the same
    basis as the audited consolidated financial statements and have
    included all adjustments, consisting of only normal recurring
    adjustments, that we consider necessary for a fair presentation
    of our financial position and operating results for such
    periods. The interim results set forth below are not necessarily
    indicative of results for the year ending December 31, 2009
    or for any other period.
In January 2007, Providence Equity Partners, together with
    Cameron Chalmers and David Muzzo (our founders and vice
    presidents) and MHT-SI, LP, acquired 100% of the voting equity
    interests in Archipelago Learning Holdings, LLC, the parent of
    Archipelago Learning, LLC, which acquired substantially all of
    the assets of Study Island, LP. See "Providence Equity
    Transactions." All periods ending prior to January 1,
    2007 are referred to as "Predecessor," and all periods
    including and after such date are referred to as
    "Successor." The consolidated financial statements for
    all Successor periods may not be comparable to those of the
    Predecessor period.
Contained within the 2007 consolidated financial statements are
    nine calendar days of operations and cash flows of the
    Predecessor. Such amounts are not material to the overall 2007
    consolidated financial statements taken as a whole. Further, the
    consolidated financial position of the Predecessor immediately
    prior to the January 10, 2007, transaction was not
    materially different from that of December 31, 2006.
    Accordingly, we have chosen January 1, 2007, as a date of
    convenience in presenting successor operating results and the
    financial statement information for the period from
    January 1, 2007 through January 9, 2007 has not been
    presented separately.
In addition, the summary historical consolidated financial and
    other data does not include financial statements of Archipelago
    Learning, Inc. because it has been formed recently for the
    purpose of effecting the offering and until the consummation of
    the Corporate Reorganization described more fully in
    "Corporate Reorganization," it will hold no material
    assets and will not engage in any operations. Upon completion of
    the Corporate Reorganization, Archipelago Learning, Inc. will
    become the parent of Archipelago Learning Holdings, LLC and its
    subsidiaries and will have no other assets or operations. See
    "Corporate Reorganization."
Our historical results are not necessarily indicative of future
    operating results. You should read the information set forth
    below in conjunction with "Selected Historical Consolidated
    Financial Data," "Management's Discussion and
    Analysis of Financial Condition and Results of Operations,"
    and the consolidated financial statements and the related notes
    included elsewhere in this prospectus.
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Table of Contents
Predecessor
Successor
Year Ended
Year Ended
December 31,
December 31,
Six Months Ended June 30,
2006
2007
2008
2008
2009
(Unaudited)
(Dollars in thousands)
Consolidated Statements of Income:
Service revenue
$
10,065
$
18,250
$
32,068
$
14,000
$
21,427
Cost of revenue
343
750
2,178
703
1,782
Gross profit
9,722
17,500
29,890
13,297
19,645
Operating expense
Sales and marketing
2,793
7,669
13,193
6,195
6,972
Content development
712
1,206
2,162
926
1,588
General and administrative
2,581
5,010
6,644
2,310
4,417
Total operating expense
6,086
13,885
21,999
9,431
12,977
Income from operations
3,636
3,615
7,891
3,866
6,668
Other income (expense)
Interest expense
—
(838
)
(5,161
)
(2,745
)
(1,377
)
Interest income
27
343
247
160
14
Derivative loss
—
(173
)
(2,119
)
(309
)
(141
)
Total other income (expense)
27
(668
)
(7,033
)
(2,894
)
(1,504
)
Income before income taxes
3,663
2,947
858
972
5,164
(Provision) benefit for income taxes
—
(23
)
164
(42
)
(133
)
Net income
$
3,663
$
2,924
$
1,022
$
930
$
5,031
Other Data:
EBITDA(1)
$
3,707
$
5,112
$
7,955
$
4,499
$
8,047
Adjusted EBITDA(1)
$
8,146
$
14,119
$
21,851
$
7,397
$
8,628
Number of schools using Study Island products(2)
7,856
13,100
17,307
15,441
19,214
June 30, 2009
Pro Forma
Actual
As Adjusted(3)
(Unaudited)
(In thousands)
Balance Sheet Data:
Deferred revenue
$
26,468
$
Cash and cash equivalents
$
15,940
$
Total assets
$
144,412
$
Long-term debt
$
67,726
$
Total liabilities
$
99,463
$
Total members' equity
$
44,949
$
(1)
We present EBITDA and Adjusted EBITDA in this prospectus to
    provide investors with supplemental measures of our operating
    performance and, in the case of Adjusted EBITDA, information
    utilized in the calculation of the financial covenants under our
    credit facility and in the determination of compensation.
    EBITDA, as used in this prospectus, is defined as consolidated
    net income before net interest expense, consolidated income
    taxes and consolidated depreciation and amortization. Adjusted
    EBITDA differs from
footnotes continued on following page
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Table of Contents
the term "EBITDA" as it is commonly used. Adjusted
    EBITDA, as used in this prospectus, means "Consolidated
    EBITDA" as that term is defined under our credit facility,
    which is generally consolidated net income before consolidated
    interest expense, consolidated amortization expense,
    consolidated depreciation expense, consolidated tax expense, in
    each case as defined more fully in the agreement governing our
    credit facility. The other items excluded in this calculation
    include, but are not limited to, derivative losses, changes in
    deferred revenue, non-cash compensation expense, certain
    investment and permitted acquisition expenses, certain permitted
    payments to Providence Equity Partners, unusual non-recurring
    charges, agency fees paid to the administrative agent and
    adjustments related to the acquisition of TeacherWeb.
In addition to the financial covenant requirements under our
    credit facility, management uses EBITDA and Adjusted EBITDA as a
    measure of operating performance for planning purposes,
    including the preparation of budgets and projections, as well as
    to facilitate analysis of the allocation of resources and to
    evaluate the effectiveness of business strategies. Further, we
    believe EBITDA and Adjusted EBITDA are frequently used by
    securities analysts, investors and other interested parties in
    the evaluation of companies in industries similar to ours.
EBITDA enables investors to isolate the effects on profitability
    and operating metrics, such as service revenue, operating
    expense and selling, general and administrative expense. In
    addition to its use to monitor performance trends, EBITDA
    provides a comparative metric to management and investors that
    is consistent across companies that have different capital
    structures, operate in different tax jurisdictions and capital
    investments. This enables management and investors to compare
    our performance on a consolidated basis and on a segment basis
    to that of our peers. Adjusted EBITDA is also used by management
    to measure operating performance and by investors to measures a
    company's ability to service its debt and other cash needs.
    Management believes the inclusion of the adjustments to EBITDA
    and Adjusted EBITDA are appropriate to provide additional
    information to investors about certain material non-cash items
    and about unusual items that we do not expect to continue at the
    same level in the future.
EBITDA and Adjusted EBITDA are not recognized terms under GAAP.
    Accordingly, they should not be used as indicators of, or
    alternatives to, net income as measures of operating
    performance. Although we use EBITDA as a measure to assess the
    operating performance of our business, EBITDA has significant
    limitations as an analytical tool because it excludes certain
    material costs. For example, it does not include interest
    expense, which has been a necessary element of our costs.
    Because we use capital assets, depreciation expense is a
    necessary element of our costs and ability to generate service
    revenue. In addition, the omission of the substantial
    amortization expense associated with our intangible assets
    further limits the usefulness of this measure. EBITDA also does
    not include the payment of taxes, which is also a necessary
    element of our operations. Because EBITDA does not account for
    these expenses, its utility as a measure of our operating
    performance has material limitations. Because of these
    limitations management does not view EBITDA in isolation or as a
    primary performance measure and also uses other measures, such
    as net income, invoiced sales, average purchase and renewal rate
    to measure operating performance. Because the definitions of
    EBITDA and Adjusted EBITDA (or similar measures) may vary among
    companies and industries, they may not be comparable to other
    similarly titled measures used by other companies.
footnotes continued on following page
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The following table presents a reconciliation of EBITDA and
    Adjusted EBITDA to net income for each of the periods presented:
Predecessor
Successor
Year Ended
Six Months Ended
December 31,
Year Ended December 31,
June 30,
2006
2007
2008
2008
2009
(unaudited)
(In thousands)
Net Income
$
3,663
$
2,924
$
1,022
$
930
$
5,031
Interest expense
—
838
5,161
2,745
1,377
Interest income, net
(27
)
(343
)
(247
)
(160
)
(14
)
Tax provision (benefit)
—
23
(164
)
42
133
Depreciation/amortization
71
1,670
2,183
942
1,520
EBITDA
$
3,707
$
5,112
$
7,955
$
4,499
$
8,047
Derivative loss(A)
—
173
2,119
309
141
Change in deferred revenue(B)
4,439
7,613
9,791
1,727
(454
)
Stock based compensation(C)
—
631
355
189
212
Investments and permitted acquisition expense(D)
—
13
263
37
57
Sponsor payments(E)
—
—
65
45
—
Unusual, non-recurring charges(F)
—
564
955
306
600
Agency fees(G)
—
13
113
50
25
TeacherWeb pro forma adjustments(H)
—
—
235
235
—
Adjusted EBITDA
$
8,146
$
14,119
$
21,851
$
7,397
$
8,628
footnotes continued on following page
11
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(A)
Derivative loss includes our interest rate swap that we entered
    into as required by our credit facility.
(B)
Change in deferred revenue is the net change in deferred revenue
    at the end of such period from the deferred revenue at the end
    of the previous period. For a description of how we calculate
    deferred revenue, see "Management's Discussion and
    Analysis of Financial Condition and Results of
    Operations — Components of Service Revenue and
    Expense — Service Revenue."
(C)
Stock-based compensation includes non-cash compensation expense
    recorded in respect of shares of Archipelago Learning Holdings,
    LLC issued to our employees. See Note 12 to our financial
    statements contained elsewhere in this prospectus.
(D)
Investments and permitted acquisition expense includes cash fees
    and expenses in connection with investments or acquisitions
    permitted by our credit facility.
(E)
Sponsor payments are payments to Providence Equity Partners that
    are permitted under our credit facility, and include the
    reimbursement of customary fees and reasonable out-of-pocket
    expenses to our directors or the managers of Archipelago
    Learning Holdings, LLC, such as travel and other expenses.
(F)
Unusual, non-recurring charges include severance costs,
    relocation costs, retention bonuses, and one-time contract
    labor, accounting, legal and bank fees. In 2009, we also
    incurred one-time expenses in connection with our initial public
    offering.
(G)
Agency fees are fees paid to the agents under our credit
    facility.
(H)
TeacherWeb pro forma includes adjustments to reflect
    TeacherWeb's EBITDA from January 2008 until our acquisition
    of TeacherWeb in June 2008.
(2)
A school is considered to be using our products if it has an
    active subscription for any or all of the Study Island products
    available to it.
(3)
Gives effect to (i) our Corporate Reorganization as more
    fully described in "Corporate Reorganization" and
    (ii) the sale
    of           shares
    of our common stock in this offering by us at an assumed initial
    public offering price of $      per
    share (the midpoint of the price range set forth on the cover of
    this prospectus) after deducting underwriting discounts and
    commissions and estimated offering expenses payable by us, and
    the application of the net proceeds from this offering as
    described under "Use of Proceeds."
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RISK
    FACTORS
An investment in our common stock involves a high degree of
    risk. You should carefully consider the following risks, as well
    as the other information contained in this prospectus, before
    making an investment in our company. If any of the following
    risks actually occur, our business, results of operations or
    financial condition may be materially adversely affected. In
    such an event, the trading price of our common stock could
    decline and you could lose part or all of your investment.
    Additional risks that we currently do not know about or that we
    currently believe to be immaterial may also impair our business
    operations.
Risks
    Related to Our Business and Industry
Most of
    our customers are public schools, which rely on state, local and
    federal funding. If any state, local or federal funding is
    materially reduced, our public school customers may no longer be
    able to afford to purchase our products and services, and our
    business, financial condition, results of operations and cash
    flow could be materially adversely affected.
In 2008 and the first six months of 2009, approximately 96.8%
    and 93.1%, respectively, of our service revenue was generated by
    sales of our Study Island products. Approximately 99.0% of our
    Study Island customers in 2008 and the first six months of 2009,
    respectively, were public schools and school districts. Although
    public funding varies by state and municipality, public schools
    and districts typically receive most of their funding from state
    and local governments, and a smaller portion from the federal
    government. Budget appropriations for education at all levels of
    government are determined through the political process and, as
    a result, the funding schools receive may fluctuate.
State and federal educational funding is primarily funded
    through income taxes, and local educational funding is primarily
    funded through property taxes. As a result of the ongoing
    recession, income tax revenue for the 2008 tax year has
    decreased, which has put pressure on state and federal budgets.
    In addition, with the recent decline in real estate values in
    almost every state and the resulting reassessments, property tax
    revenue is expected to decline over the next few years. For
    example, in the fourth quarter of 2008, North Carolina,
    Pennsylvania and Ohio, three of the four states accounting for
    our highest per-state service revenue, have had decreases in
    their tax revenue of 3.9%, 3.6% and 5.4%, respectively,
    resulting in mid-year 2009 budget gaps of $2.0 billion,
    $2.3 billion and $1.2 billion, respectively.
    Continuing unfavorable economic conditions may result in
    education budget cuts and lead to lower overall spending,
    including lower technology spending, by our current and
    potential clients, which may materially adversely affect our
    service revenue. According to the Center on Budget and Policy
    Priorities, at least 25 states made cuts or have proposed
    cuts to K-12 and early education funding in their 2010 budgets.
    Declines in tax receipts and gaps in states' budgets could
    result in decreased education spending as well as cuts in
    recently enacted federal education spending programs, reduced
    school budgets and reduced availability of discretionary funds,
    all of which could materially adversely affect our service
    revenue and results of operations.
If
    national educational standards and assessments are adopted, or
    if existing metrics for applying state standards are revised,
    new competitors could more easily enter our markets or the
    demands in the markets we currently serve may change.
With the reauthorization of the Elementary and Secondary
    Education Act, known as No Child Left Behind, or NCLB, in 2001,
    Congress conditioned the receipt of federal funding for
    education on the establishment of educational standards, annual
    assessments and the achievement of adequate yearly progress
    milestones. These standards are established at the state level,
    and there are currently no national educational standards that
    are required to be assessed pursuant to NCLB. As part of NCLB,
    each state is required to establish clear performance standards
    for each grade level in reading, math and science in grades 3
    through 8, and for high school exit or end-of-course exams. Most
    of our service revenue from Study Island is concentrated in
    grades K-8, which accounted for approximately 87% of our service
    revenue in 2008. High school accounted for approximately 10% of
    Study Island service revenue for 2008. A shift to national
    performance standards or a reduction in the use of
    government-imposed standards may result in a material decline in
    demand in the markets that we serve.
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In addition, our Study Island products are specifically built
    from the varying assessment standards in all 50 states,
    which we believe differentiates them from the products offered
    by our competitors. If national standards and assessments
    replace the current state assessments, it would be easier for
    competitors to develop similar products tailored to one national
    set of standards rather than multiple state standards. If such
    an increase in competition occurred, our ability to compete
    effectively could be negatively impacted and our service revenue
    and profitability could materially decline.
If
    Congress does not reauthorize the Elementary and Secondary
    Education Act, commonly referred to as NCLB since the 2001
    reauthorization, or other legislation does not continue to
    mandate state educational standards and annual assessments,
    demand for our products and services could be materially
    adversely affected.
NCLB substantially increased the importance of
state-by-state
educational standards and assessments by making such standards
    and annual assessments a condition to receipt of federal
    educational funding. NCLB initially was scheduled for
    reauthorization in October 2008, but was extended until October
    2009 in order to allow the new U.S. presidential
    administration to impact the direction of any future
    reauthorization. If NCLB is not reauthorized or extended or does
    not maintain or increase the importance of
state-by-state
education standards and assessments, or if other federal or
    state legislation were to lessen the importance of such
    standards and assessments, our products and services could
    become significantly less valuable to our customers, and our
    service revenue and profitability could materially decline.
Our
    recent rapid growth, the recent introduction of a number of our
    products and services and our entry into new markets make it
    difficult for us to evaluate our current and future business
    prospects, and we may be unable to effectively manage our growth
    and new initiatives, which may increase the risk of your
    investment and could harm our business, financial condition,
    results of operations and cash flow.
We were founded in 2000 and began offering our Study Island
    products in 2001. Since our founding, we have continually
    launched new Study Island products, entered additional states
    and experienced rapid growth and increasing market share in the
    expanding market for online learning. We began offering our
    Study Island products in all 50 states as of the
2008-2009
school year, and we started offering TeacherWeb services after
    its acquisition in 2008. We launched our Northstar Learning
    product line in April 2009. Because many of our current products
    and services are relatively new and we have recently entered new
    markets, we may be unable to evaluate the relative success and
    future prospects, particularly in light of our goals to
    continually grow our existing and new customer base, expand our
    product and service offerings, acquire and integrate
    complementary businesses and enter new markets.
In addition, our growth, recent product introductions and entry
    into new markets may place a significant strain on our resources
    and increase demands on our executive management, personnel and
    systems, and our operational, administrative and financial
    resources may be inadequate. We may also not be able to maintain
    or accelerate our current growth rate, effectively manage our
    expanding operations, or achieve planned growth on a timely or
    profitable basis, particularly if the number of students and
    educators using our products and services increase or their
    demands and needs change as our business expands. Our management
    will be required to expand its knowledge of diverse aspects of
    the education industry and maintain relationships with key
    customers across several sectors of the education market. If we
    are unable to manage our growth and expand operations
    effectively, we may experience operating inefficiencies, the
    quality of our products and services could deteriorate, and our
    business and results of operations could be materially adversely
    affected.
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The
    recent ongoing adoption of online learning in established
    education markets makes it difficult for us to evaluate our
    current and future business prospects. If web-based education
    fails to achieve widespread acceptance by students, parents,
    teachers, schools and other institutions, our growth and
    profitability may suffer.
The use of online learning technology is a relatively new
    approach in the traditional K-12 education testing and
    assessment markets. There can be no assurance that online
    products and services will achieve long-term success in the K-12
    or postsecondary education markets. Our success depends in part
    upon the continued adoption by teachers and school districts of
    technology-based education initiatives. Some academics and
    educators oppose online education in principle and have
    expressed concerns regarding the perceived loss of control over
    the education process that can result from offering content
    online. As a necessary corollary to the acceptance of web-based
    education in the classroom, our growth depends in part on
    parental acceptance of the role of technology in education and
    the availability of internet access in the home. If the
    acceptance of technology-based education does not continue to
    increase, our ability to continue to grow our business could be
    materially impaired.
Our
    service revenue is primarily generated by sales of subscriptions
    to our Study Island products over the term of the subscription.
    Our customer renewal rates for subscriptions for Study Island,
    TeacherWeb and Northstar Learning are difficult to predict and
    declines in our sales of Study Island products or in renewal
    rate may materially adversely affect our business and results of
    operations.
Sales of our Study Island products accounted for 96.8% and 93.1%
    of our service revenue in 2008 and in the first six months of
    2009, respectively, and we anticipate that revenue from sales of
    our Study Island products will continue to account for a
    substantial majority of our service revenue for the next few
    years. Our Study Island products are sold as subscriptions
    through purchase orders. The subscription period for our Study
    Island products is typically 12 months and we occasionally
    sell multi-year subscriptions. In the case of certain sales, a
    limited number of additional months may be offered as a
    promotional incentive. Our Study Island customers are not
    obligated to renew their subscriptions at the end of the term,
    nor are they required to pay any penalties if they fail to renew
    their subscriptions. Because of constraints on the use of state,
    local and federal funding, most of our Study Island customers
    are only able to purchase subscriptions for 12 month
    periods. As a result, our Study Island customers have no
    obligation to renew their subscriptions after the expiration of
    their initial subscription period. Our sales team begins the
    renewal process approximately six months prior to a subscription
    ending and consider this a renewal opportunity; however, our
    Study Island customers may choose to renew for fewer students or
    fewer products, which would reduce our service revenue. Sales of
    our Study Island products or services or our customer renewal
    rates may decline or fluctuate as a result of a number of
    factors, including decreased demand, adverse regulatory actions,
    decreased school funding, pricing pressures, competitive factors
    or any other reason. These and other factors that have affected
    our Study Island sales or customer renewal rates in the past are
    not predictive of the future, and, as a result, we cannot
    accurately predict customer renewal rates. If sales to new Study
    Island customers decline or our Study Island customers do not
    renew their subscriptions at previous levels, our service
    revenue may decline, which would negatively impact our business,
    financial condition, results of operations and cash flow.
Our Study
    Island products are predominantly purchased by individual
    schools, and any decisions at the district or state level to use
    the products and services of one of our competitors, or to limit
    or reduce the use of web-based educational products, could
    materially adversely affect our ability to attract and retain
    customers.
The sales model for our Study Island products relies heavily on
    word-of-mouth referrals among teachers and school administrators
    who purchase our products and services for use by their
    students. If policymakers at the district or state level
    determine that our products and services are not the best option
    for schools in their district or state, or if they decide to
    decrease or discontinue the use of web-based educational
    products, individual teachers and school administrators may lose
    the ability to decide what, if any, online educational products
    and services they use. Such action may result in the loss of our
    customers and may materially limit our ability to attract new
    customers. In addition, our competitors may more successfully
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market their products and services at the district or state
    level, which could result in a decline in sales of our products
    and services.
Fluctuations
    in sales or renewals may not be immediately reflected in our
    results of operations.
We recognize service revenue from our customers monthly over the
    term of each of their subscriptions, which is typically
    12 months, and we occasionally sell multi-year
    subscriptions. In the case of certain sales, a limited number of
    additional months may be offered as a promotional incentive. As
    a result, substantially all of the service revenue we recognize
    in any period is deferred revenue from subscriptions purchased
    during previous periods. Consequently, a decline in new sales or
    subscription renewals in any particular period will not
    necessarily be fully reflected in the service revenue in that
    period and will negatively affect our revenue in future periods.
    In addition, we may be unable to adjust our cost structure to
    reflect this reduced service revenue. Accordingly, the effect of
    significant downturns in sales or subscription renewals and
    market acceptance of our products and services may not be fully
    reflected in our results of operations until future periods. Our
    subscription model also makes it difficult for us to rapidly
    increase our service revenue through additional sales in any
    period, as service revenue from new customers would be
    recognized ratably over the applicable subscription term.
Our
    business is subject to seasonal fluctuations, which may cause
    our cash flow to fluctuate from quarter-to-quarter and
    materially adversely impact the market price of our common
    stock.
Our cash flow may fluctuate as a result of seasonal variations
    in our business, principally due to:
•
our customers' spending patterns, including shifts in the
    timing of when individual schools or districts purchase our
    products and services;
•
the timing of school districts' funding sources and
    budgeting cycles;
•
the timing of the release of federal funds to states, and the
    subsequent timing of states' release of such funds to
    districts and schools;
•
the timing of expirations and renewals of subscriptions;
•
the timing of special promotions and discounts, including
    additional free months of subscriptions; and
•
the timing of acquisitions and non-recurring charges incurred in
    connection with acquisitions and extraordinary transactions.
A significant percentage of our new sales and subscription
    renewals occur in the third quarter because teachers and school
    administrators typically make purchases for the new academic
    year at the beginning of their district's fiscal year,
    which is usually July 1. The fourth calendar quarter has
    historically produced the second highest level of sales and
    renewals, followed by the second quarter and finally the first
    quarter. Because payment in full for subscriptions is typically
    due at the time of subscription or renewal, and our operating
    expense, of which labor and sales commissions make up the
    largest portion, historically have been fairly consistent
    throughout the year, we typically have higher cash flow in the
    quarters with stronger sales and renewals. We expect quarterly
    fluctuations in our cash flow to continue.
System
    disruptions, vulnerability from security risks to our networks,
    databases and online applications and an inability to expand and
    upgrade our systems in a timely manner to meet unexpected
    increases in demand could damage our reputation, impact our
    ability to generate service revenue and limit our ability to
    attract and retain customers.
The performance and reliability of our technology infrastructure
    is critical to our business. Any failure to maintain
    satisfactory online product performance, reliability, security
    or availability of our web platform infrastructure may
    significantly reduce customer satisfaction and damage our
    reputation, which would
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negatively impact our ability to attract new customers and
    obtain customer renewals. The risks associated with our web
    platform include:
•
breakdowns or system failures resulting in a prolonged shutdown
    of our servers, including failures attributable to power
    shutdowns or attempts to gain unauthorized access to our
    systems, which may cause loss or corruption of data or
    malfunction of software or hardware;
•
disruption or failure in our colocation provider, which would
    make it difficult or impossible for students and teachers to log
    on to our websites;
•
damage from fire, flood, tornado, power loss or
    telecommunications failures;
•
infiltration by hackers or other unauthorized persons; and
•
any infection by or spread of computer viruses.
In addition, increases in the volume of traffic on our websites
    could strain the capacity of our existing infrastructure, which
    could lead to slower response times or system failures. This
    would cause a disruption or suspension of our product and
    service offerings.
Any web platform interruption or inadequacy that causes
    performance issues or interruptions in the availability of our
    websites could reduce customer satisfaction and result in a
    reduction in the number of customers using our products and
    services. If sustained or repeated, these performance issues
    could reduce the attractiveness of our websites and products and
    services.
We may need to incur additional costs to upgrade our computer
    systems in order to accommodate system disruptions, security
    risks and increased demand if we anticipate that our systems
    cannot handle higher volumes of traffic in the future. However,
    the costs and complexities involved in expanding and upgrading
    our systems may prevent us from doing so in a timely manner and
    may prevent us from adequately meeting the demand placed on our
    systems.
Any
    significant interruption in the operations of our data centers
    could cause a loss of data and disrupt our ability to manage our
    network hardware and software and technological infrastructure,
    and any significant interruption in the operations of our call
    center could disrupt our ability to respond to requests for help
    or service and process orders in a timely manner.
All of our web platform servers and routers, including backup
    servers, are currently located in colocation facilities in
    Dallas, Texas. As part of our disaster recovery arrangements, we
    intend to replicate all of our customers' data in a
    separate backup facility near Chicago, Illinois. If we are not
    successful in implementing this plan, we will face additional
    risks relating to the central location of our servers. Any
    disruption of operations of or damage to these servers could
    materially harm our ability to operate our business. We also may
    need to make additional investments to improve the performance
    of our platform and prevent disruption of our services. Any
    disruption or significant interruption in the operations of our
    data centers may result in a loss of customer satisfaction and
    limit our ability to retain and attract customers.
We rely in part on our call center to generate sales leads and
    maintain a high level of customer service. Any significant
    interruption in the operation of our call center, including an
    interruption caused by our failure to expand or upgrade our
    systems or to manage these expansions or upgrades, could reduce
    our ability to receive and respond to requests for help or
    service, process orders and provide products and services, which
    could result in lost or cancelled sales and damage to our
    reputation.
We are
    subject to laws and regulations as a result of our collection
    and use of personal information, particularly from our K-12
    student users, and any violations of such laws or regulations,
    or any breach, theft or loss of such information, could
    materially adversely affect our reputation and operations and
    expose us to costly litigation.
Our products and services require the disclosure of student
    information by educational institutions and credit card
    information by some customers. The vast majority of our Study
    Island users are minors. The Child
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Online Protection Act and the Children's Online Privacy
    Protection Act restrict the distribution of materials considered
    harmful to children and impose additional restrictions on the
    ability of online services to collect information from minors.
    Many states have also passed laws requiring notification to
    users when there is a security breach of personal data.
    Additionally, the Family Educational Rights and Privacy Act, or
    FERPA, protects the privacy and restricts the disclosure of
    student information, and we must remain FERPA-compliant through
    security policies, processes, systems and controls, including
    using software that detects hackers and other unauthorized or
    illegal activities. We cannot predict whether new technological
    developments could circumvent these security measures. If the
    security measures that we use to protect personal or student
    information or credit card information are ineffective, we may
    be subject to liability, including claims for invasion of
    privacy, impersonation, unauthorized purchases with credit card
    information or other similar claims. In addition, the Federal
    Trade Commission and several states have investigated the use of
    personal information by certain internet companies. We could
    incur significant expense and our business could be materially
    adversely affected if new regulations regarding use of personal
    information are introduced, if our security measures are
    ineffective or if our privacy practices are investigated.
Domestic
    and foreign government regulation relating to the internet or
    our products and services could cause us to incur significant
    expense, and failure to comply with applicable regulations could
    make our business less efficient or even impossible to continue
    to operate.
As web-based commerce continues to evolve, increasing regulation
    by federal, state or foreign agencies becomes more likely. In
    addition, taxation of services provided over the internet or
    other charges imposed by government agencies or by private
    organizations for accessing the internet may also be imposed.
    Any regulation imposing greater fees for internet use or
    restricting information exchange over the internet could result
    in a decline in the use of the internet and the viability of
    internet-based services, which could materially harm our
    business.
We may
    not be able to develop new products and services or expand our
    existing product lines in a timely and cost effective
    manner.
Each of our Study Island products is built from specific state
    standards for a particular grade level and subject in the K-12
    market. With these standards continually changing and our
    release of new Study Island products, as well as the launch of
    our new Northstar Learning product line, our product and content
    development teams may not be able to respond to changing market
    requirements on a timely basis. We intend to launch upgraded
    versions of our Study Island products in January 2010, but we
    may be unable to do so in a timely and cost effective manner
    that appropriately meets market demand. In addition, we are
    entering new markets, such as the postsecondary and
    international markets, which will place new demands on our
    product and content development teams. These are new, unproven
    markets for us, and if we are not able to generate sufficient
    new revenue to exceed the incremental costs associated with
    developing and delivering new products and entering new markets,
    our results of operations may be materially and adversely
    affected. Furthermore, we may be unable to develop and offer
    additional products and services on commercially reasonable
    terms and in a timely manner, if at all, or maintain the quality
    and consistency necessary to keep pace with changes in market
    requirements and respond to competitive pressures. A failure to
    do any of these things may result in a material decline in our
    service revenue and may prevent us from maintaining
    profitability.
If we
    acquire or invest in any companies, services or technologies in
    the future, they could prove difficult to integrate, disrupt our
    business, dilute stockholder value and materially adversely
    affect our results of operations.
As part of our growth strategy, we may acquire or invest in
    complementary companies, services and technologies. We cannot
    assure you that we will be able to consummate any such
    acquisitions or investments on favorable terms or at all. If we
    fail to properly evaluate and execute our acquisitions or
    investments, our business and prospects may be seriously harmed.
    Such acquisitions and investments involve numerous risks,
    including:
•
difficulties in integrating operations, technologies, services
    and personnel;
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•
diversion of financial and managerial resources from existing
    operations;
•
risk of entering new markets;
•
potential write-offs of acquired assets;
•
significant one-time costs, including banking, legal and
    accounting fees and payment of severance packages;
•
potential loss of key employees;
•
inability to generate sufficient service revenue to offset
    acquisition or investment costs; and
•
delays in customer purchases due to uncertainty.
In connection with our acquisitions or investments, we may also
    incur additional debt and related interest expense, as well as
    unforeseen liabilities, which could have a material adverse
    effect on our business, financial condition and results of
    operations. Furthermore, we may issue additional equity in
    connection with these transactions, which would result in
    dilution to our existing shareholders.
If we are
    unable to maintain and enhance our brand identity, our business
    and results of operations may suffer.
The continued development of our brand identity is important to
    our business, and expanding brand awareness is critical to
    attracting and retaining our customers. Although our Study
    Island and TeacherWeb brands have existed since 2000, our
    Northstar Learning and Archipelago Learning brands are
    relatively new, having launched in April 2009 and August 2009,
    respectively. Our existing and potential customers may not be
    aware of the relationship of our brands with one and another,
    particularly Archipelago Learning serving as an umbrella for
    each of our products and Northstar Learning serving as a
    postsecondary education product line. Our newer brands are
    unproven and may not be successfully received by our customers.
    In addition, we have launched our Study Island products in a
    number of new states over the last two years and intend to
    launch Study Island products in international markets in the
    future. As we continue to increase subscriptions and extend our
    geographic reach, maintaining quality and consistency across all
    of our products and services may become more difficult to
    achieve, and any significant and well-publicized failure to
    maintain this quality and consistency will have a detrimental
    effect on our brand. We cannot provide assurances that our sales
    and marketing efforts will be successful in further promoting
    our brand in a competitive and cost-effective manner. If we are
    unable to maintain and enhance our brand recognition and
    increase awareness of our products and services, or if we incur
    excessive sales and marketing expense, our business and results
    of operations could be materially adversely affected.
Our
    future growth and profitability will depend in large part upon
    the effectiveness and efficiency of our marketing expenditures
    in recruiting new customers.
Our future growth and profitability will depend in large part
    upon the effectiveness and efficiency of our marketing
    expenditures, including our ability to:
•
create greater awareness of our brands;
•
select the right market, media and specific media vehicles in
    which to advertise;
•
identify the most effective and efficient level of spending in
    each market, media and specific media vehicle;
•
determine the appropriate creative message and media mix for
    advertising, marketing and promotional expenditures;
•
effectively manage marketing costs, including creative and media
    expense, in order to maintain acceptable customer acquisition
    costs;
•
generate leads for sales, including obtaining educator lists in
    a cost-effective manner;
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•
drive traffic to our website; and
•
convert customer inquiries into actual orders.
Our planned marketing expenditures may not result in increased
    service revenue or generate sufficient levels of product and
    brand awareness, and we may not be able to increase our net
    sales at the same rate as we increase our advertising
    expenditures.
We
    operate in a highly competitive market subject to rapid
    technological changes, and increasing competition could lead to
    pricing pressures, reduced operating margins, loss of market
    share and increased capital expenditures.
The markets for our products and services are highly
    competitive, and we expect increased competition in the future
    that could adversely affect our service revenue and market
    share. Our current competitors include but are not limited to:
•
providers of online and offline supplemental instructional
    materials for the core subject areas of reading, mathematics,
    science and social studies for K-12 institutions;
•
companies that provide K-12-oriented software and online-based
    educational assessment and remediation products and services to
    students, educators, parents and educational institutions;
•
the assessment divisions of established education publishers,
    including Pearson Education, Inc., The McGraw-Hill Companies and
    Houghton Mifflin Harcourt Company;
•
providers of online and offline test preparation materials;
•
traditional print textbook and workbook companies that publish
    K-12 core subject educational materials, standardized test
    preparation materials or paper and pencil assessment tools;
•
summative assessment companies, which traditionally assess
    student learning at the end of a class period, that have
    expanded their line to include products that provide periodic
    assessment in the classroom to gauge student learning and inform
    instruction, also known as formative assessment;
•
non-profit and membership educational organizations and
    government agencies that offer online and offline products and
    services, including in some cases at no cost, to assist
    individuals in standards mastery and test preparation; and
•
website portal and teacher productivity programs designed to
    help educators create and manage classroom and school websites
    and in-house website development efforts at the class, school
    and district level.
Some of our competitors may have more resources than we do, and
    several of the largest K-12 educational publishers may have more
    experience, larger customer bases and greater brand recognition
    in the markets we serve. Further, larger established companies
    with high brand recognition and extensive experience providing
    various educational products to the K-12 market may develop
    online products and services that are competitive with our core
    products and services. These competitors may be able to devote
    greater resources than us to the development, promotion and sale
    of their services and respond more quickly than we can to new
    technologies or changes in customer requirements or preferences.
    We may not be able to compete effectively with current or future
    competitors, especially those with significantly greater
    resources or more established customer bases, which may
    materially adversely affect our sales and our business.
If our
    products or services contain errors, new product releases could
    be delayed or our services could be disrupted. As a result, our
    customers may choose not to renew their subscriptions and our
    business could be materially adversely affected.
If our products or services contain defects, errors or security
    vulnerabilities, our reputation could be harmed, which could
    result in significant costs to us and impair our ability to sell
    our products and services in
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the future. Because our products and services are complex and
    because we do not "pre-launch" any of our products or
    upgrades to any third parties prior to the official launch, they
    may contain undetected errors or defects, known as bugs. Bugs
    can be detected at any point in time, but are more common when a
    new product or service is introduced or when new versions are
    released. We expect that, despite our testing, errors will be
    found in the future. If an error occurs, our product and service
    offerings may be disrupted, causing delays or interruptions.
    Significant errors, delays or disruptions could lead to:
•
decreases in customer satisfaction with and loyalty toward our
    products and services;
•
delays in or loss of market acceptance of our products and
    services;
•
diversion of our resources;
•
a lower rate of subscription renewals or upgrades;
•
injury to our reputation; or
•
increased service expense or payment of damages.
If we are
    unable to adapt our products and services to technological
    changes, to the emergence of new computing devices and to more
    sophisticated online services, we may lose market share and
    service revenue, and our business could suffer.
We need to anticipate, develop and introduce new products,
    services and applications on a timely and cost effective basis
    that keeps pace with technological developments and changing
    customer needs. For example, the number of individuals who
    access the internet through devices other than a personal
    computer, such as personal digital assistants, mobile
    telephones, televisions and set-top box devices, has increased
    dramatically, and this trend is likely to continue. Our products
    and services were designed for internet use on desktop and
    laptop computers. The lower resolution, functionality and memory
    associated with alternative devices currently available may make
    the use of our products and services through such devices
    difficult. We have no experience to date in operating versions
    of our products and services developed or optimized for users of
    alternative devices. Accordingly, it is difficult to predict the
    problems we may encounter in developing versions of our products
    and services for use on these alternative devices, and we may
    need to devote significant resources to the creation, support
    and maintenance of such versions. If we fail to develop or sell
    products and services cost effectively that respond to these or
    other technological developments and changing customer needs, we
    may lose market share and service revenue and our business could
    materially suffer.
Protection
    of our intellectual property is limited, and any misuse of our
    intellectual property by others, including software piracy,
    could harm our business, reputation and competitive
    position.
Our trademarks, copyrights, trade secrets, trade dress and
    designs are valuable and integral to our success and competitive
    position. However, we cannot assure you that we will be able to
    adequately protect our proprietary rights through reliance on a
    combination of copyrights, trademarks, trade secrets,
    confidentiality procedures, contractual provisions and technical
    measures. Protection of trade secrets and other intellectual
    property rights in the markets in which we operate and compete
    is highly uncertain and may involve complex legal questions. We
    cannot completely prevent the unauthorized use or infringement
    of our intellectual property rights, as such prevention is
    inherently difficult. Despite enforcement efforts against
    software piracy, we lose significant service revenue due to
    illegal use of our software. If piracy activities increase, they
    may further harm our business.
We also expect that the more successful we are, the more likely
    that competitors will try to illegally use our proprietary
    information and develop products that are similar to ours, which
    may infringe on our proprietary rights. In addition, we could
    potentially lose future trade secret protection for our source
    code if any unauthorized disclosure of such code occurs. The
    loss of future trade secret protection could make it easier for
    third parties to compete with our products by copying
    functionality. Any changes in, or unexpected interpretations of,
    the trade secret and other intellectual property laws in any
    country in which we operate may compromise our ability to
    enforce our trade secret and intellectual property rights.
    Costly and time-consuming
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litigation could be necessary to enforce and determine the scope
    of our confidential information and trade secret protection. If
    we are unable to protect our proprietary rights or if third
    parties independently develop or gain access to our or similar
    technologies, our business, service revenue, reputation and
    competitive position could be materially adversely affected.
We may be
    sued for infringing the intellectual property rights of others
    and such actions would be costly to defend, could require us to
    pay damages or enter into royalty or license agreements with
    third parties and could limit our ability or increase our costs
    to use certain content or technologies in the future.
We may be sued for infringing the intellectual property rights
    of others or be subject to litigation based on allegations of
    infringement or other violations of intellectual property
    rights. Regardless of merits, intellectual property claims are
    often time-consuming and expensive to litigate and settle. In
    addition, to the extent claims against us are successful, we may
    have to pay substantive monetary damages or discontinue any of
    our products, services or practices that are found to be in
    violation of another party's rights. We also may have to
    seek a license and make royalty payments to continue offering
    our products and services or following such practices, which may
    significantly increase our operating expense.
Our
    customers can input their own content to our websites. We have
    limited control over this content, which could expose us to
    liability from third parties.
As part of a subscription to Study Island, TeacherWeb or
    Northstar Learning, our customers are able to input their own
    content onto our websites, which may be accessible by other
    users who share the same subscription as the creator of the
    content. For example, educators and students may post articles
    or other materials on class discussion boards, which may give
    rise to claims from third parties for the unauthorized
    duplication or distribution of this material. We may be exposed
    to liability, including fines and costly litigation, if the
    content violates the intellectual property rights of a third
    party, or otherwise violates any law or regulation, including
    FERPA, the Child Online Protection Act and the Children's
    Online Privacy Protection Act.
The
    confidentiality, non-disclosure and other agreements we use to
    protect our products, trade secrets and proprietary information
    may prove unenforceable or inadequate.
We protect our products, trade secrets and proprietary
    information, in part, by requiring all of our employees to enter
    into agreements providing for the maintenance of confidentiality
    and the assignment of rights to inventions made by them while
    employed by us. We also enter into non-disclosure agreements
    with our technical consultants, customers, vendors and resellers
    to protect our confidential and proprietary information. We
    cannot assure you that our confidentiality agreements with our
    employees, consultants and other third parties will not be
    breached, that we will be able to effectively enforce these
    agreements, that we will have adequate remedies for any breach,
    or that our trade secrets and other proprietary information will
    not be disclosed or will otherwise be protected.
We also rely on contractual and license agreements with third
    parties in connection with their use of our products and
    technology. There is no guarantee that such parties will abide
    by the terms of such agreements or that we will be able to
    adequately enforce our rights, in part because we rely, in many
    instances, on "click-wrap" licenses, which are
    licenses that can only be read and accepted online and are not
    negotiated or signed by individual licensees. Accordingly, some
    provisions of our licenses, including provisions protecting
    against unauthorized use, copying, transfer, resale and
    disclosure of the licensed software program, may be
    unenforceable under the laws of several jurisdictions.
We have
    not registered copyrights for all of our products, which may
    limit our ability to enforce them.
We have not registered our copyrights in all of our software,
    written materials, website information, designs or other
    copyrightable works. The United States Copyright Act
    automatically protects all of our copyrightable works, but
    without registration we cannot enforce those copyrights against
    infringers or seek certain statutory remedies for any such
    infringement. Preventing others from copying our products,
    written
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materials and other copyrightable works is important to our
    overall success in the marketplace. In the event we decide to
    enforce any of our copyrights against infringers, we will first
    be required to register the relevant copyrights, and we cannot
    be sure that all of the material for which we seek copyright
    registration would be registrable in whole or in part, or that
    once registered, we would be successful in bringing a copyright
    claim against any such infringers.
We must
    monitor and protect our internet domain names to preserve their
    value. We may be unable to prevent third parties from acquiring
    domain names that are similar to, infringe on or otherwise
    decrease the value of our trademarks.
We own several domain names that include the terms Study Island,
    Archipelago Learning, TeacherWeb and Northstar Learning, among
    others. Third parties may acquire substantially similar domain
    names that decrease the value of our domain names and trademarks
    and other proprietary rights which may hurt our business.
    Moreover, the regulation of domain names in the United States
    and foreign countries is subject to change. Governing bodies
    could appoint additional domain name registrars or modify the
    requirements for holding domain names. Governing bodies could
    also establish additional "top-level" domains, which
    are the portion of the web address that appears to the right of
    the "dot," such as "com," "net,"
    "gov" or "org." As a result, we may not
    maintain exclusive rights to all potentially relevant domain
    names in the United States or in other countries in which we
    conduct business, which could harm our business and reputation.
We do not
    own all of the software, content and other technologies used in
    our products and services.
Some of our products and services include intellectual property
    owned by third parties, including licensed content for reading
    passages and other educational content. From time to time we may
    be required to renegotiate with these third parties or negotiate
    with new third parties to include or continue using their
    technology or content in our existing products, in new versions
    of our existing products or in wholly new products. We may not
    be able to negotiate or renegotiate licenses on commercially
    reasonable terms, or at all, and the third-party software we use
    may not be appropriately supported, maintained or enhanced by
    the licensors. If we are unable to obtain the rights necessary
    to use or continue to use third-party technology or content in
    our products and services, or if those third parties are unable
    to support, maintain and enhance their software, we could
    experience increased costs or delays or reductions in product
    releases and functionality until equivalent software or content
    can be developed, identified, licensed and integrated.
Our
    future success depends on our ability to retain our key
    employees.
We are dependent on the services of Tim McEwen, our Chief
    Executive Officer, James Walburg, our Chief Financial Officer,
    Ray Lowrey, our Chief Technology Officer, Julie Huston, our Vice
    President of Sales, our other vice presidents and senior
    editors, and other members of our senior management team. Other
    than non-compete provisions of limited duration included in
    employment agreements that we have with certain executives, we
    do not generally seek non-compete agreements with key personnel,
    and they may leave and subsequently compete against us. The loss
    of service of any of our senior management team, particularly
    those who are not party to employment agreements with us, or our
    failure to attract and retain other qualified and experienced
    personnel on acceptable terms, could have a material adverse
    effect on our business.
We may be
    unable to attract and retain the skilled employees needed to
    sustain and grow our business.
Our success to date has largely depended on, and will continue
    to depend on, the skills, efforts and motivations of our
    executive team and employees, who generally have significant
    experience with our company and within the education industry.
    Our success also depends largely on our ability to attract and
    retain highly qualified IT engineers and programmers, content
    writers and editors, sales and marketing managers and corporate
    management personnel. We may experience difficulties in locating
    and hiring qualified personnel and in retaining such personnel
    once hired, which may materially and adversely affect our
    business.
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We may
    have exposure to greater than anticipated tax
    liabilities.
We are and have been subject to income taxes and other taxes in
    a variety of jurisdictions and are subject to review by both
    various state and federal taxation authorities. The
    determination of our provision for income taxes and other tax
    liabilities requires significant judgment and the ultimate tax
    outcome may differ from the amounts recorded in our consolidated
    financial statements, which may materially affect our financial
    results in the period or periods for which such determination is
    made.
Although
    we do not currently transact a material amount of business in
    foreign countries, we intend to expand into international
    markets, which will subject us to additional economic,
    operational and political risks that could increase our costs
    and make it difficult for us to continue to operate
    profitably.
We intend to launch Study Island products in Canada and other
    international markets. The addition of international operations
    may require significant expenditure of financial and management
    resources and result in increased administrative and compliance
    costs. As a result of such expansion, we will be increasingly
    subject to the risks inherent in conducting business
    internationally, including:
•
foreign currency fluctuations, which could result in reduced
    service revenue and increased operating expense;
•
potentially longer payment and sales cycles;
•
increased difficulty in collecting accounts receivable;
•
the effect of applicable foreign tax structures, including tax
    rates that may be higher than tax rates in the United States or
    taxes that may be duplicative of those imposed in the United
    States;
•
tariffs and trade barriers;
•
general economic and political conditions in each country;
•
inadequate intellectual property protection in foreign countries;
•
uncertainty regarding liability for information retrieved and
    replicated in foreign countries;
•
the difficulties and increased expense in complying with a
    variety of domestic and foreign laws, regulations and trade
    standards, including the Foreign Corrupt Practices Act; and
•
unexpected changes in regulatory requirements.
The
    current global financial crisis and adverse worldwide economic
    conditions may have significant effects on our business,
    financial condition and results of operations.
The current global financial crisis - which has included,
    among other things, significant reductions in available capital
    and liquidity, substantial reductions
and/or
fluctuations in equity and currency values and a worldwide
    recession, the extent of which is likely to be significant and
    prolonged - may materially adversely affect our business.
    We have already begun to experience some weakening in demand for
    our products and services, and we cannot predict whether it will
    continue or increase. In an economic downturn like the current
    one, which is characterized by higher unemployment, lower family
    income, lower corporate earnings, lower business investment and
    lower consumer spending, the demand for our products and
    services may be materially adversely affected. See
    "— Most of our customers are public schools,
    which rely on state, local and federal funding. If any state,
    local or federal funding is materially reduced, our public
    school customers may no longer be able to afford to purchase our
    products and services, and our business, financial condition,
    results of operations and cash flow could be materially
    adversely affected."
The credit markets have been experiencing extreme volatility and
    disruption since August 2007. The current global financial
    crisis affecting the banking system and the possibility that
    financial institutions may consolidate or fail has resulted in a
    tightening of the credit markets, which could impair our ability
    to refinance our existing debt, to draw upon our revolving
    credit facility or incur additional debt, to seek other
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funding sources to meet our liquidity needs or to fund planned
    expansion. Furthermore, the tightening of the credit markets may
    delay or prevent our customers from securing funding adequate to
    operate their businesses and purchase our products and services,
    leading to an increase in our bad debt levels.
We may
    need additional capital in the future, but there is no assurance
    that funds will be available on acceptable terms, or at
    all.
We may need to raise additional funds in order to achieve growth
    or fund other business initiatives. This financing may not be
    available in sufficient amounts or on terms acceptable to us and
    may be dilutive to existing shareholders if raised through
    additional equity offerings. Additionally, any securities issued
    to raise funds may have rights, preferences or privileges senior
    to those of existing shareholders. If adequate funds are not
    available or are not available on acceptable terms, our ability
    to expand, develop or enhance services or products, or respond
    to competitive pressures may be materially limited.
Our
    existing indebtedness could adversely affect our financial
    condition and we may not be able to fulfill our debt
    obligations.
As of June 30, 2009, Archipelago Learning, LLC had
    outstanding term loans in an aggregate principal amount equal to
    $68.4 million and no revolving credit loans outstanding
    under its revolving credit facility which expires in November
    2013. The agreements governing this credit facility contain
    various covenants that limit our ability to, among other things:
•
incur or guarantee additional indebtedness;
•
pay dividends or make other distributions to our shareholders;
•
make restricted payments;
•
incur liens;
•
engage in transactions with affiliates; and
•
enter into business combinations.
These restrictions could limit our ability to withstand general
    economic downturns that could affect our business, obtain future
    financing, make acquisitions or capital expenditures, conduct
    operations or otherwise capitalize on business opportunities
    that may arise. Additionally, we will use a significant portion
    of our cash flow to pay interest on our outstanding debt,
    limiting the amount available for working capital, capital
    expenditures and other general corporate purposes.
We may be more vulnerable to adverse economic conditions than
    less leveraged competitors and thus less able to withstand
    competitive pressures. If our cash flow is inadequate to make
    interest and principal payments on our debt, we might have to
    refinance our indebtedness or issue additional equity or other
    securities and may not be successful in those efforts or may not
    obtain terms favorable to us. Additionally, our ability to
    finance working capital needs and general corporate purposes for
    the public and private markets, as well as the associated cost
    of funding, is dependent, in part, on our credit ratings, which
    may be adversely affected if we experience declining service
    revenue. Any of these events could reduce our ability to
    generate cash available for investment or debt repayment or to
    make improvements or respond to events that would enhance
    profitability. We may incur significantly more debt in the
    future, which will increase each of the foregoing risks related
    to our indebtedness. In addition, the obligations under our
    credit facility are guaranteed by AL Midco, LLC, or AL Midco,
    and TeacherWeb, and are secured by liens on substantially all of
    the assets owned by Archipelago Learning, LLC, AL Midco and
    TeacherWeb. For a more detailed description of our credit
    facility, see "Management's Discussion and Analysis of
    Financial Condition and Results of Operation — Credit
    Facility" and "Description of Material
    Indebtedness."
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Risks
    Related to Our Common Stock and this Offering
We expect
    that our stock price will fluctuate significantly, and you may
    not be able to resell your shares at or above the initial public
    offering price.
The trading price of our common stock is likely to be volatile
    and subject to wide price fluctuations in response to various
    factors, including:
•
market conditions in the broader stock market;
•
actual or anticipated fluctuations in our quarterly financial
    and results of operations;
•
introduction of new products or services by us or our
    competitors;
•
issuance of new or changed securities analysts' reports or
    recommendations;
•
investor perceptions of us and the educational industry;
•
sales, or anticipated sales, of large blocks of our stock;
•
additions or departures of key personnel;
•
regulatory or political developments;
•
litigation and governmental investigations; and
•
changing economic conditions.
These and other factors may cause the market price and demand
    for our common stock to fluctuate substantially, which may limit
    or prevent investors from readily selling their shares of common
    stock and may otherwise negatively affect the liquidity of our
    common stock. In addition, in the past, when the market price of
    a stock has been volatile, holders of that stock have sometimes
    instituted securities class action litigation against the
    company that issued the stock. If any of our stockholders were
    to bring a lawsuit against us, we could incur substantial costs
    defending the lawsuit. Such a lawsuit could also divert the time
    and attention of our management from our business.
There is
    no existing market for our common stock, and we do not know if
    one will develop to provide you with adequate
    liquidity.
Prior to this offering, there has been no public market for
    shares of our common stock. We cannot predict the extent to
    which investor interest in our company will lead to the
    development of a trading market on the New York Stock Exchange,
    also called the NYSE, or The NASDAQ Stock Market LLC, also
    called Nasdaq, or how liquid that market may become. If an
    active trading market does not develop or is not sustained, you
    may have difficulty selling any of our common stock that you
    purchase at an attractive price or at all. The initial public
    offering price of shares of our common stock will be determined
    by negotiation between us and the underwriters and may not be
    indicative of prices that will prevail following the completion
    of this offering. The market price of shares of our common stock
    may decline below the initial public offering price, and you may
    not be able to resell your shares of our common stock at or
    above the initial offering price.
If
    securities or industry analysts do not publish research or
    reports about our business, if they adversely change their
    recommendations regarding our stock or if our results of
    operations do not meet their expectations, our stock price and
    trading volume could decline.
The trading market for our common stock will be influenced by
    the research and reports that industry or securities analysts
    publish about us or our business. If one or more of these
    analysts cease coverage of our company or fail to publish
    reports on us regularly, we could lose visibility in the
    financial markets, which in turn could cause our stock price or
    trading volume to decline. Moreover, if one or more of the
    analysts who cover us downgrade recommendations regarding our
    stock, or if our results of operations do not meet their
    expectations, our stock price could decline and such decline
    could be material.
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Sales of
    substantial amounts of our common stock in the public markets,
    or the perception that such sales might occur, could reduce the
    price of our common stock and may dilute your voting power and
    your ownership interest in us.
If our existing shareholders sell substantial amounts of our
    common stock in the public market following this offering, the
    market price of our common stock could decrease significantly.
    The perception in the public market that our existing
    shareholders might sell shares of common stock could also
    depress our market price. Upon the consummation of this
    offering, we will
    have           shares
    of common stock outstanding. Our directors, executive officers,
    the selling stockholders and substantially all of our other
    stockholders will be subject to the
lock-up
agreements described in "Underwriting" and are subject
    to the Rule 144 holding period requirements described in
    "Shares Eligible for Future Sale." After these
lock-up
agreements have expired and holding periods have elapsed and the
lock-up
periods set forth in our stockholders' agreement to be
    entered into in connection with this offering have
    expired,           additional
    shares will be eligible for sale in the public market. The
    market price of shares of our common stock may drop
    significantly when the restrictions on resale by our existing
    shareholders lapse. A decline in the price of shares of our
    common stock might impede our ability to raise capital through
    the issuance of additional shares of our common stock or other
    equity securities.
You will
    experience immediate and substantial book value dilution after
    this offering.
The initial public offering price of our common stock will be
    substantially higher than the pro forma net tangible book value
    per share of the outstanding common stock immediately after the
    offering. Based on an assumed initial public offering price of
    $      per share (the midpoint of the
    price range set forth on the cover of this prospectus) and our
    net tangible book value on a pro forma basis as of June 30,
    2009, if you purchase our common stock in this offering, you
    will suffer immediate dilution in net tangible book value per
    share of approximately $      per
    share. See "Dilution."
Insiders
    will continue to have substantial control over us after this
    offering and could limit your ability to influence the outcome
    of key transactions, including a change of control.
Our principal stockholders, directors and executive officers and
    entities affiliated with them will own
    approximately     % of the outstanding
    shares of our common stock after this offering. As a result,
    these stockholders, if acting together, would be able to
    influence or control matters requiring approval by our
    stockholders, including the election of directors and the
    approval of mergers or other extraordinary transactions. They
    may also have interests that differ from yours and may vote in a
    way with which you disagree and which may be adverse to your
    interests. The concentration of ownership may have the effect of
    delaying, preventing or deterring a change of control of our
    company, could deprive our stockholders of an opportunity to
    receive a premium for their common stock as part of a sale of
    our company may materially adversely affect the market price of
    our common stock.
We are a
    "controlled company" within the meaning of the NYSE
    and Nasdaq rules and will qualify for, and intend to rely on,
    exemptions from certain corporate governance requirements. As a
    result, you will not have the same protections afforded to
    shareholders of companies that are subject to such
    requirements.
After completion of this offering, Providence Equity Partners
    will continue to control a majority of the voting power of our
    outstanding common stock. As a result, we are a "controlled
    company" within the meaning of the NYSE and Nasdaq
    corporate governance standards. Under these rules, a
    "controlled company" may elect not to comply with
    certain corporate governance requirements, including:
•
the requirement that a majority of the board of directors
    consist of independent directors;
•
the requirement that we have a nominating/corporate governance
    committee that is composed entirely of independent directors
    with a written charter addressing the committee's purpose
    and responsibilities;
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•
the requirement that we have a compensation committee that is
    composed entirely of independent directors with a written
    charter addressing the committee's purpose and
    responsibilities; and
•
the requirement for an annual performance evaluation of the
    nominating and corporate governance and compensation committees.
Following this offering, we intend to utilize these exemptions.
    As a result, we will not have a majority of independent
    directors, our nominating and corporate governance committee,
    and compensation committee will not consist entirely of
    independent directors and such committees will not be subject to
    annual performance evaluations. Accordingly, you will not have
    the same protections afforded to shareholders of companies that
    are subject to all of the corporate governance requirements of
    the NYSE or Nasdaq.
We will
    have broad discretion in applying the net proceeds of this
    offering and we may not use those proceeds in ways that will
    enhance the market value of our common stock.
Our management will retain broad discretion to allocate the net
    proceeds of this offering. The net proceeds may be applied in
    ways with which you and other investors in the offering may not
    agree or which do not increase the value of your investment. We
    intend to use our net proceeds from this offering for general
    corporate purposes, which may include the acquisition of other
    businesses, products or technologies. We have not allocated
    these net proceeds for any specific purposes. Our management may
    not be able to yield a significant return, if any, on any
    investment of these net proceeds. We will not receive any of the
    proceeds from the sale of the shares of our common stock by the
    selling stockholders.
As a
    result of becoming a public company, we will be obligated to
    develop and maintain proper and effective internal control over
    financial reporting and will be subject to other requirements
    that will be burdensome and costly. We may not timely complete
    our analysis of our internal control over financial reporting,
    or these internal controls may not be determined to be
    effective, which could adversely affect investor confidence in
    our company and, as a result, the value of our common
    stock.
We have historically operated our business as a private company.
    After this offering, we will be required to file with the
    Securities and Exchange Commission, or SEC, annual and quarterly
    information and other reports that are specified in
    Section 13 of the Securities Exchange Act of 1934, as
    amended, or the Exchange Act. We will also be required to ensure
    that we have the ability to prepare financial statements that
    are fully compliant with all SEC reporting requirements on a
    timely basis. In addition, we will become subject to other
    reporting and corporate governance requirements, including the
    requirements of the NYSE or Nasdaq, and certain provisions of
    the Sarbanes-Oxley Act of 2002 and the regulations promulgated
    thereunder, which will impose significant compliance obligations
    upon us. As a public company, we will be required to:
•
prepare and distribute periodic public reports and other
    stockholder communications in compliance with our obligations
    under the federal securities laws and the NYSE or Nasdaq rules;
•
create or expand the roles and duties of our board of directors
    and committees of the board;
•
institute more comprehensive financial reporting and disclosure
    compliance functions;
•
supplement our internal accounting and auditing function,
    including hiring additional staff with expertise in accounting
    and financial reporting for a public company;
•
enhance and formalize closing procedures at the end of our
    accounting periods;
•
establish an internal audit function;
•
enhance our investor relations function;
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•
establish new internal policies, including those relating to
    disclosure controls and procedures; and
•
involve and retain to a greater degree outside counsel and
    accountants in the activities listed above.
These changes will require a significant commitment of
    additional resources. We may not be successful in implementing
    these requirements and implementing them could adversely affect
    our business or results of operations. In addition, if we fail
    to implement the requirements with respect to our internal
    accounting and audit functions, our ability to report our
    results of operations on a timely and accurate basis could be
    impaired.
Our
    internal control over financial reporting does not currently
    meet the standards required by Section 404 of the
    Sarbanes-Oxley Act, and failure to achieve and maintain
    effective internal control over financial reporting in
    accordance with Section 404 of the Sarbanes-Oxley Act could
    have a material adverse effect on us.
Our internal control over financial reporting does not currently
    meet the standards required by Section 404 of the
    Sarbanes-Oxley Act, standards that we will be required to meet
    in the course of preparing our 2010 financial statements. We do
    not currently have comprehensive documentation of our internal
    controls, nor do we document or test our compliance with these
    controls on a periodic basis in accordance with Section 404
    of the Sarbanes-Oxley Act. Furthermore, we have not tested our
    internal controls in accordance with Section 404 and, due
    to our lack of documentation, such a test would not be possible
    to perform at this time.
We are in the early stages of addressing our internal control
    procedures to satisfy the requirements of Section 404,
    which requires an annual management assessment of the
    effectiveness of our internal control over financial reporting.
    We will incur additional costs in order to improve our internal
    control over financial reporting and comply with
    Section 404, including increased auditing and legal fees
    and costs associated with hiring additional accounting and
    administrative staff. If, as a public company, we are not able
    to implement the requirements of Section 404 in a timely
    manner or with adequate compliance, our independent registered
    public accounting firm may not be able to attest to the
    effectiveness of our internal control over financial reporting.
    If we are unable to maintain adequate internal control over
    financial reporting, we may be unable to report our financial
    information on a timely basis, may suffer adverse regulatory
    consequences or violations of applicable stock exchange listing
    rules and may breach the covenants under our credit facility.
    There could also be a negative reaction in the financial markets
    due to a loss of investor confidence in us and the reliability
    of our financial statements.
Provisions
    in our certificate of incorporation and bylaws and Delaware law
    may discourage, delay or prevent a change of control of our
    company or changes in our management and, therefore, may depress
    the trading price of our stock.
Our certificate of incorporation and bylaws include certain
    provisions that could have the effect of discovering, delaying
    or preventing a change of control of our company or changes in
    our management, including, among other things:
•
restrictions on the ability of our stockholders to fill a
    vacancy on the board of directors;
•
our ability to issue preferred stock with terms that the board
    of directors may determine, without stockholder approval, which
    could be used to significantly dilute the ownership of a hostile
    acquirer;
•
the absence of cumulative voting in the election of directors
    which may limit the ability of minority stockholders to elect
    directors; and
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•
advance notice requirements for stockholder proposals and
    nominations, which may discourage or deter a potential acquirer
    from soliciting proxies to elect a particular state of directors
    or otherwise attempting to obtain control of us.
These provisions in our certificate of incorporation and bylaws
    may discourage, delay or prevent a transaction involving a
    change in control of our company that is in the best interest of
    our minority stockholders. Even in the absence of a takeover
    attempt, the existence of these provisions may adversely affect
    the prevailing market price of our common stock if they are
    viewed as discouraging future takeover attempts.
We do not
    expect to pay dividends, and any return on your investment will
    likely be limited to the appreciation of our common
    stock.
We currently intend to retain our future earnings, if any, for
    the foreseeable future, to repay indebtedness and to fund the
    development and growth of our business. We do not intend to pay
    any dividends to holders of our common stock and the agreements
    governing our credit facility significantly restrict our ability
    to pay dividends. As a result, capital appreciation in the price
    of our common stock, if any, will be your only source of gain or
    income on an investment in our common stock.
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FORWARD-LOOKING
    STATEMENTS
This prospectus contains forward-looking statements that are
    subject to risks and uncertainties. All statements other than
    statements of historical fact included in this prospectus are
    forward-looking statements. Forward-looking statements give our
    current expectations and projections relating to our financial
    condition, results of operations, plans, objectives, future
    performance and business. You can identify forward-looking
    statements by the fact that they do not relate strictly to
    historical or current facts. These statements may include words
    such as "anticipate," "estimate,"
    "expect," "project," "forecast,"
    "plan," "intend," "believe,"
    "may," "should," "can have,"
    "likely," "future" and other words and terms
    of similar meaning in connection with any discussion of the
    timing or nature of future operating or financial performance or
    other events.
The forward-looking statements contained in this prospectus are
    based on assumptions that we have made in light of our industry
    experience and on our perceptions of historical trends, current
    conditions, expected future developments and other factors we
    believe are appropriate under the circumstances. As you read and
    consider this prospectus, you should understand that these
    statements are not guarantees of performance or results. They
    involve risks, uncertainties (some of which are beyond our
    control) and assumptions. Although we believe that these
    forward-looking statements are based on reasonable assumptions,
    you should be aware that many factors could affect our actual
    financial results and cause them to differ materially from those
    anticipated in the forward-looking statements. We believe these
    factors include the following risks, among others:
•
Most of our customers are public schools, which rely on state,
    local and federal funding. If any state, local or federal
    funding is materially reduced, our public school customers may
    no longer be able to afford to purchase our products and
    services;
•
If national educational standards and assessments are adopted,
    or if existing metrics for applying state standards are revised,
    new competitors could more easily enter our markets or the
    demands in the markets we currently serve may change;
•
If Congress does not reauthorize the Elementary and Secondary
    Education Act, commonly referred to as NCLB since the 2001
    reauthorization, or other legislation does not continue to
    mandate state educational standards and annual assessments,
    demand for our products and services could be materially
    adversely affected;
•
Our recent rapid growth, the recent introduction of a number of
    our products and services and our entry into new markets make it
    difficult for us to evaluate our current and future business
    prospects, and we may be unable to effectively manage our growth
    and new initiatives;
•
The recent ongoing adoption of online learning in established
    education markets makes it difficult for us to evaluate our
    current and future business prospects. If web-based education
    fails to achieve widespread acceptance by students, parents,
    teachers, schools and other institutions, our growth and
    profitability may materially suffer;
•
Our service revenue is primarily generated by sales of
    subscriptions to our Study Island products over the term of the
    subscription. Our customer renewal rates for Study Island,
    TeacherWeb and Northstar Learning are difficult to predict and
    declines in our sales of Study Island products or in renewal
    rate may materially adversely affect our business and results of
    operations; and
•
Our Study Island products are predominantly purchased by
    individual schools, and any decisions at the district or state
    level to use the products and services of one of our
    competitors, or to limit or reduce the use of web-based
    educational products, could materially adversely affect our
    ability to attract and retain customers.
Should one or more of these risks or uncertainties materialize,
    or should any of these assumptions prove incorrect, our actual
    results may vary in material respects from those projected in
    these forward-looking statements.
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Any forward-looking statement made by us in this prospectus
    speaks only as of the date on which we make it. Factors or
    events that could cause our actual results to differ may emerge
    from time to time, and it is not possible for us to predict all
    of them. We undertake no obligation to update any
    forward-looking statement, whether as a result of new
    information, future developments or otherwise, except as may be
    required by law.
This prospectus also contains market data related to our
    business and industry. See "Industry and Market Data."
    This market data includes projections that are based on a number
    of assumptions. If these assumptions turn out to be incorrect,
    actual results may differ from the projections based on these
    assumptions. As a result, our markets may not grow at the rates
    projected by these data, or at all. The failure of these markets
    to grow at these projected rates may have a material adverse
    effect on our business, financial condition, results of
    operations and the market price of our common stock.
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PROVIDENCE
    EQUITY TRANSACTIONS
In January 2007, Providence Equity Partners V, LP and
    affiliated investment funds, or Providence Equity Partners,
    together with Cameron Chalmers and David Muzzo (our founders and
    vice presidents) and MHT-SI, LP, acquired 100% of the voting
    equity interests in Archipelago Learning Holdings, LLC (formerly
    known as Study Island Holdings, LLC), the parent of Archipelago
    Learning, LLC (formerly known as Study Island, LLC), which
    acquired substantially all of the assets of Study Island, LP,
    for $104.8 million, including transaction costs and working
    capital adjustments. In connection with the acquisition:
•
Providence Equity Partners contributed approximately
    $84.5 million in cash for approximately 77.2% of the voting
    equity interests in Archipelago Learning Holdings, LLC;
•
Cameron Chalmers and David Muzzo each contributed
    $10.0 million, for a total of $20.0 million, for
    approximately 9.1% each, or a total of approximately 18.2%, of
    the voting equity interests in Archipelago Learning Holdings,
    LLC;
•
MHT-SI, LP contributed approximately $5.0 million in cash
    for approximately 4.6% of the voting equity interests in
    Archipelago Learning Holdings, LLC;
•
With the cash contributed by Providence Equity Partners, Cameron
    Chalmers, David Muzzo and MHT-SI, LP, (i) Archipelago
    Learning, LLC purchased substantially all the assets of Study
    Island, LP for $100.0 million, (ii) Archipelago
    Learning, LLC paid $4.6 million in transaction costs
    related to the acquisition of the assets of Study Island, LP,
    and (iii) $5.0 million was retained by Archipelago
    Learning, LLC for general corporate purposes;
•
In November 2007, Archipelago Learning, LLC as borrower, and the
    other persons designated as credit parties from time to time,
    entered into a credit facility providing for a
    $70.0 million term loan and a $10.0 million revolving
    credit facility with General Electric Capital Corporation, as a
    lender and as agent for all lenders, NewStar Financial, Inc., as
    syndication agent, the other parties thereto as lenders and GE
    Capital Markets, Inc. and NewStar Financial, Inc., as joint lead
    arrangers and joint bookrunners; and
•
With the borrowings under our term loan and cash on hand,
    (i) Archipelago Learning, LLC paid $1.7 million in
    financing fees related to our credit facility,
    (ii) Archipelago Learning, LLC distributed
    $74.8 million of its proceeds under its term loan and cash
    on hand to Archipelago Learning Holdings, LLC, and
    (iii) Archipelago Learning Holdings, LLC made distributions
    of $74.8 million to the holders of its voting equity
    interests.
We refer to the foregoing transactions collectively as the
    "Providence Equity Transactions."
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Table of Contents
CORPORATE
    REORGANIZATION
Prior to this offering, Archipelago Learning Holdings, LLC and
    its subsidiaries conducted our business. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, the holders of shares of
    Archipelago Learning Holdings, LLC, and certain of their
    affiliates will enter into the following transactions with
    Archipelago Learning, Inc., a newly formed Delaware corporation
    that will act as a holding company for our business:
•
The direct or indirect holders of Class A and
Class A-2 shares
of Archipelago Learning Holdings, LLC will, directly or
    indirectly, contribute all such Class A and
Class A-2 shares
of Archipelago Learning Holdings, LLC held by such parties to
    Archipelago Learning, Inc. in exchange for an aggregate
    of      shares of common stock;
•
Our officers, directors and employees who hold vested
    Class B shares of Archipelago Learning Holdings, LLC will
    contribute their vested Class B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of      shares of
    common stock;
•
Our officers, directors and employees who hold unvested
    Class B shares of Archipelago Learning Holdings, LLC will
    contribute their unvested Class B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of      shares of
    restricted common stock subject to time-based vesting;
•
Our officers, directors and employees (other than our chief
    executive officer, chief financial officer, chief technology
    officer and co-founders) who hold Class C shares of
    Archipelago Learning Holdings, LLC will contribute such
    Class C shares to Archipelago Learning, Inc. in exchange
    for an aggregate
    of           shares
    of common stock and an aggregate
    of          
    restricted stock unit awards subject to vesting based on, among
    other things, the trading price of our common stock;
•
Our chief executive officer, chief financial officer, chief
    technology officer and co-founders will contribute their
    Class C shares of Archipelago Learning Holdings, LLC to
    Archipelago Learning, Inc. in exchange for an aggregate
    of           shares
    of restricted common stock subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners and an aggregate
    of          
    restricted stock unit awards subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners; and
•
Providence Equity Partners V-A Study Island L.L.C. and
    Providence Equity
Partners V-A
Study Island L.P., which will not have any assets other than
    their direct or indirect interests in Archipelago Learning
    Holdings, LLC, will merge with and into Archipelago Learning,
    Inc.
We refer to the transactions listed above as the "Corporate
    Reorganization."
For a more detailed discussion of the Class B and
    Class C shares, the restricted stock and the restricted
    stock unit awards see "Compensation Discussion and
    Analysis — Elements of Executive
    Compensation — Equity Compensation Plan."
As a result of the Corporate Reorganization, Archipelago
    Learning, Inc. will own all of the outstanding member interests
    of Archipelago Learning Holdings, LLC, and Archipelago Learning,
    Inc. will become the parent of Archipelago Learning Holdings,
    LLC and its subsidiaries, and will have no other assets or
    operations. Archipelago Learning, Inc. will be a Delaware
    "C" corporation, and as such will be subject to
    federal and state income taxes. Archipelago Learning Holdings,
    LLC was a limited liability company not subject to state or
    federal income taxes, and as such, the historical financial data
    included in this prospectus do not reflect what our financial
    position and results of operations would have been had we been a
    taxable corporation. We expect to record a net deferred tax
    asset and a corresponding credit to our provision for
34
Table of Contents
income taxes of approximately
    $      million upon becoming a
    "C" corporation immediately before the effectiveness
    of the registration statement of which this prospectus is a
    part. This deferred tax asset primarily results from the excess
    of the tax basis over the book basis of certain of our
    intangible assets. We expect to realize future reductions in our
    current tax expense as these intangibles are amortized and
    deducted from taxable income on our tax returns. Prior to the
    closing of this offering, Archipelago Learning Holdings, LLC
    intends to make additional cash distributions of approximately
    $1.4 million to the members of Archipelago Learning
    Holdings, LLC to enable them to meet their estimated income tax
    obligations for the period from January 1, 2009 to the date
    of the Corporate Reorganization. The amount of this distribution
    will be based on Archipelago Learning Holdings, LLC's
    estimated net taxable income from January 1, 2009 to the
    date of the Corporate Reorganization. In addition, the board of
    managers of Archipelago Learning Holdings, LLC has authorized an
    $8.0 million distribution to its members in the third
    quarter of 2009. Purchasers of shares in this offering will not
    receive any of these distributions.
The Corporate Reorganization will not affect our operations,
    which we will continue to conduct through our operating
    subsidiaries.
The purpose of the Corporate Reorganization is to reorganize our
    corporate structure so that the top-tier entity in our corporate
    structure - the entity whose common stock is being offered
    to the public in this offering - is a corporation rather
    than a limited liability company and so that our existing
    investors will own our common stock directly. References in this
    prospectus to our capitalization and other matters pertaining to
    our equity and participation shares prior to the consummation of
    the Corporate Reorganization relate to the capitalization and
    equity and participation shares of Archipelago Learning
    Holdings, LLC. This prospectus includes consolidated financial
    statements and consolidated financial data of Archipelago
    Learning Holdings, LLC. In addition, this prospectus includes an
    audited balance sheet of Archipelago Learning, Inc.
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USE OF
    PROCEEDS
We estimate that the net proceeds to us from our sale
    of           shares
    of common stock in this offering will be
    $          ,
    after deducting underwriting discounts and commissions and
    estimated expenses payable by us in connection with this
    offering. This assumes a public offering price of
    $      per share, which is the midpoint
    of the price range set forth on the cover of this prospectus. We
    intend to use net proceeds from shares that we sell for general
    corporate purposes.
A $1.00 increase (decrease) in the assumed initial public
    offering price of $      per share
    would increase (decrease) the net proceeds to us from this
    offering by $      million,
    assuming the number of shares offered by us, as set forth on the
    cover page of this prospectus, remains the same and after
    deducting underwriting discounts and commissions and estimated
    expenses payable by us.
We will not receive any proceeds from the sale of shares by the
    selling stockholders, which include entities affiliated with
    members of our board of directors.
DIVIDEND
    POLICY
Archipelago Learning Holdings, LLC paid aggregate distributions
    to its equity holders of $74.8 million, and
    $0.8 million in the year end December 31, 2007 and the
    six months ended June 30, 2009, respectively. These
    distributions were made in connection with the Providence Equity
    Transactions and to enable equity holders to meet their
    estimated tax obligations. See "Management's
    Discussion and Analysis of Financial Condition and Results of
    Operations." Archipelago Learning Holdings, LLC has
    authorized an $8.0 million special distribution to its
    equity holders in the third quarter of 2009. In addition,
    Archipelago Learning Holdings, LLC intends to make additional
    distributions of approximately $1.4 million to its equity
    holders to enable them to meet their estimated tax obligations
    for the period from January 1, 2009 to the date of the
    Corporate Reorganization. The amount of this distribution will
    be based on Archipelago Learning Holdings, LLC's estimated
    net taxable income from January 1, 2009 to the date of the
    Corporate Reorganization. Investors in this offering will not
    receive these distributions.
After this offering, we intend to retain all available funds and
    any future earnings to reduce debt and fund the development and
    growth of our business and we do not anticipate paying any
    dividends on our capital stock for the foreseeable future. Our
    ability to pay dividends on our common stock is restricted by
    the terms of our credit facility and may be further restricted
    by any future indebtedness we incur. Our business is conducted
    through our subsidiaries. Dividends from, and cash generated by
    our subsidiaries will be our principal sources of cash to repay
    indebtedness, fund operations and pay dividends. Accordingly,
    our ability to pay dividends to our stockholders is dependent on
    the earnings and distributions of funds from our subsidiaries.
Any future determination to pay dividends will be at the
    discretion of our board of directors and will take into account:
•
restrictions in our credit facility;
•
general economic and business conditions;
•
the financial condition and results of operations of us and our
    subsidiaries;
•
our capital requirements and the capital requirements of our
    subsidiaries;
•
the ability of our operating subsidiaries to pay dividends and
    make distributions to us; and
•
such other factors as our board of directors may deem relevant.
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Table of Contents
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
    our capitalization as of June 30, 2009:
•
on an actual basis reflecting the capitalization of Archipelago
    Learning Holdings, LLC; and
•
on a pro forma as adjusted basis to give effect to:
•
our Corporate Reorganization as more fully described in
    "Corporate Reorganization;" and
•
the sale
    of           shares
    of our common stock in this offering by us at an assumed initial
    public offering price of $      per
    share (the midpoint of the price range set forth on the cover of
    this prospectus) after deducting underwriting discounts and
    commissions and estimated offering expenses payable by us, and
    the application of the net proceeds from this offering as
    described in "Use of Proceeds."
This table should be read in conjunction with "Use of
    Proceeds," "Selected Historical Consolidated Financial
    Data," "Management's Discussion and Analysis of
    Financial Condition and Results of Operations" and the
    consolidated financial statements and the related notes thereto
    included elsewhere in this prospectus.
As of June 30, 2009
Pro Forma
Actual
As Adjusted(1)
(In thousands, except
share data)
Cash and cash equivalents
$
15,940
$
Debt:
Current portion of long-term debt
700
Long-term debt, less current portion(2)
67,726
Total debt
68,426
Members' equity:
Class A shares, 109,545,064 shares authorized and
    outstanding
34,792
Class A-2 shares,
286,882 shares authorized and outstanding
750
Class B shares, 6,578,727 shares authorized and
    6,028,727 shares outstanding
855
Class C shares, 7,126,451 shares authorized and
    6,576,451 shares outstanding
343
Retained Earnings
8,209
Total member's equity
44,949
Stockholders' equity:
Preferred stock, $0.001 par
    value,      shares authorized; no
    shares issued and outstanding, on a pro forma as adjusted basis
—
Common stock, $0.001 par
    value,      shares
    authorized;      shares issued and
    outstanding, on a pro forma as adjusted basis
—
Retained income
Accumulated other comprehensive income
Total stockholders' equity
—
Total capitalization
$
113,375
$
(1)
Assuming the number of shares sold by us in this offering
    remains the same as set forth on the cover page, a $1.00
    increase or decrease in the assumed initial public offering
    price would increase or decrease, as applicable, our total
    capitalization by approximately
    $      million.
(2)
Does not include $10.0 million of our revolving credit
    facility, of which $0 was outstanding at June 30, 2009.
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DILUTION
If you invest in our common stock in this offering, your
    ownership interest will be diluted to the extent of the
    difference between the initial public offering price per share
    and the pro forma as adjusted net tangible book value per share
    of common stock upon the completion of this offering.
As of June 30, 2009, our net tangible book value was
    approximately $      million, or
    $      per share. Our net tangible book
    value represents our total tangible assets less total
    liabilities, divided by the total number of shares of common
    stock outstanding. Dilution in net tangible book value per share
    represents the difference between the amount per share paid by
    purchasers of common stock in this offering and the pro forma
    net tangible book value per share of common stock immediately
    after the consummation of this offering.
After giving effect to (i) the issuance
    of           shares
    of our common stock
    and           shares
    of our restricted common stock in exchange for outstanding
    Class A, Class A-2, Class B and Class C
    shares of Archipelago Learning Holdings, LLC in connection with
    the Corporate Reorganization and (ii) the sale of our
    common stock at an assumed initial public offering price of
    $      per share (the midpoint of the
    price range set forth on the cover of this prospectus), and
    after deducting underwriting discounts and commissions and
    estimated offering expenses payable by us, our pro forma as
    adjusted net tangible book value as of June 30, 2009 would
    have been approximately $     , or
    $      per share.
This represents an immediate increase in pro forma net tangible
    book value of $      per share to our
    existing shareholders and an immediate dilution of
    $      per share to new investors
    purchasing shares of common stock in this offering at the
    initial public offering price.
The following table illustrates the dilution to new investors on
    a per share basis:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share as of June 30,
    2009
$
Increase in pro forma net tangible book value per share
    attributable to the sale of shares in this offering
Decrease in pro forma net tangible book value per share
    attributable to the issuance of restricted common stock
Pro forma as adjusted net tangible book value per share after
    this offering
Dilution per share to new investors
$
A $1.00 increase (decrease) in the assumed initial public
    offering price of $      per share (the
    midpoint of the price range set forth on the cover of this
    prospectus) would increase (decrease) our pro forma net tangible
    book value after this offering by
    $      million and increase
    (decrease) the dilution to new investors by
    $      per share, assuming the number
    of shares offered by us, as set forth on the cover page of this
    prospectus remains the same and after deducting the estimated
    underwriting discounts and commissions and estimated offering
    expenses payable by us.
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The following table summarizes, as of June 30, 2009, the
    total number of shares of our common stock we issued and sold,
    the total consideration we received and the average price per
    share paid to us by our existing shareholders and to be paid by
    new investors purchasing shares of our common stock in this
    offering. The table assumes an initial public offering price of
    $      per share (the midpoint of the
    price range set forth on the cover of this prospectus) and
    deducts underwriting discounts and commissions and estimated
    offering expenses payable by us:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing shareholders
%
$
%
$
New investors
Total
100
%
100
%
A $1.00 increase (decrease) in the assumed initial public
    offering price of $      per share (the
    midpoint of the price range set forth on the cover of this
    prospectus) would increase (decrease) the total consideration
    paid by new investors by $      and the
    total consideration paid by all stockholders by
    $     .
In addition, we may choose to raise additional capital due to
    market conditions or strategic considerations even if we believe
    we have sufficient funds for our current or future operating
    plans. To the extent that additional capital is raised through
    the sale of equity or convertible debt securities, the issuance
    of such securities could result in further dilution to our
    stockholders.
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Table of Contents
SELECTED
    HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth the selected historical
    consolidated financial data for Archipelago Learning Holdings,
    LLC for the periods and at the dates indicated. The selected
    historical consolidated financial data as of December 31,
    2008 and December 31, 2007 and the statement of operations
    and other data for each of the years ended December 31,
    2008, 2007 and 2006 are derived from the audited consolidated
    financial statements included elsewhere in this prospectus. The
    selected historical consolidated financial data as of
    June 30, 2009 and for the six months ended June 30,
    2008 and June 30, 2009 have been derived from the unaudited
    consolidated financial statements included elsewhere in this
    prospectus. The interim results set forth below are not
    necessarily indicative of results for the year ending
    December 31, 2009 or for any other period.
In January 2007, Providence Equity Partners, together with
    Cameron Chalmers and David Muzzo (our founders and vice
    presidents) and MHT-SI, LP, acquired 100% of the voting equity
    interests in Archipelago Learning Holdings, LLC, the parent of
    Archipelago Learning, LLC, which acquired substantially all of
    the assets of Study Island, LP. See "Providence Equity
    Transactions." All periods ending prior to January 1,
    2007 are referred to as "Predecessor," and all periods
    including and after such date are referred to as
    "Successor." The consolidated financial statements for
    all Successor periods may not be comparable to those of the
    Predecessor period.
Contained within the 2007 consolidated financial statements are
    nine calendar days of operations and cash flows of the
    Predecessor. Such amounts are not material to the overall 2007
    consolidated financial statements taken as a whole. Further, the
    consolidated financial position of the Predecessor immediately
    prior to the January 10, 2007, transaction was not
    materially different from that of December 31, 2006.
    Accordingly, we have chosen January 1, 2007, as a date of
    convenience in presenting successor operating results and the
    financial statement information for the period from
    January 1, 2007 through January 9, 2007 has not been
    presented separately.
The selected historical consolidated financial data as of
    December 31, 2004 and December 31, 2005 and for the
    years ended December 31, 2004 and December 31, 2005
    has been omitted. The omitted data is not available and the
    inclusion of such data would require the conversion of cash
    basis financials to financial statements prepared in accordance
    with U.S. generally accepted accounting principles. This
    conversion would require substantial management time and cannot
    be completed without the expenditure of unreasonable effort and
    expense. In addition, as a result of our recent growth and the
    impact of the Providence Equity Transactions, the omitted
    financial data is not comparable to the financial data set forth
    below and, accordingly, we believe the omission of this
    financial data does not have a material impact on the
    understanding of our results of operations, financial
    performance and related trends. The selected historical
    consolidated financial data also does not include financial
    statements of Archipelago Learning, Inc. because it has been
    formed recently for the purpose of effecting the offering and
    until the consummation of the Corporate Reorganization described
    more fully in "Corporate Reorganization," it will hold
    no material assets and will not engage in any operations. Upon
    completion of the Corporate Reorganization, Archipelago
    Learning, Inc. will become the parent of Archipelago Learning
    Holdings, LLC and its subsidiaries and will have no other assets
    or operations. See "Corporate Reorganization."
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Table of Contents
The results indicated below and elsewhere in this prospectus are
    not necessarily indicative of our future performance. You should
    read this information together with "Capitalization,"
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations" and our consolidated
    financial statements and related notes included elsewhere in
    this prospectus.
Predecessor
Successor
Year Ended
Year Ended
Six Months Ended
December 31,
December 31,
June 30,
2006
2007
2008
2008
2009
(Unaudited)
(In thousands)
Consolidated Statements of Income:
Service revenue
$
10,065
$
18,250
$
32,068
$
14,000
$
21,427
Cost of revenue
343
750
2,178
703
1,782
Gross profit
9,722
17,500
29,890
13,297
19,645
Operating expense
Sales and marketing
2,793
7,669
13,193
6,195
6,972
Content development
712
1,206
2,162
926
1,588
General and administrative
2,581
5,010
6,644
2,310
4,417
Total operating expense
6,086
13,885
21,999
9,431
12,977
Income from operations
3,636
3,615
7,891
3,866
6,668
Other income (expense)
Interest expense
—
(838
)
(5,161
)
(2,745
)
(1,377
)
Interest income
27
343
247
160
14
Derivative loss
—
(173
)
(2,119
)
(309
)
(141
)
Total other income (expense)
27
(668
)
(7,033
)
(2,894
)
(1,504
)
Income before income taxes
3,663
2,947
858
972
5,164
(Provision) benefit for income taxes
—
(23
)
164
(42
)
(133
)
Net income
$
3,663
$
2,924
$
1,022
$
930
$
5,031
Net income per equity share attributable to members' equity
    (Basic and diluted)
$
1,832
$
0.03
$
0.01
$
0.01
$
0.05
Distributions to Predecessor per equity share attributable to
    members' equity (Basic and diluted)
$
3,177
$
589
—
—
—
Distributions to Successor per equity share attributable to
    members' equity (Basic and diluted)
—
—
—
—
$
0.01
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Predecessor
Successor
Year Ended
Year Ended
Six Months Ended
December 31,
December 31,
June 30,
2006
2007
2008
2008
2009
(Unaudited)
(In thousands)
Balance Sheet Data:
Deferred revenue
$
9,318
$
16,931
$
26,922
$
18,858
$
26,468
Cash and cash equivalents
1,387
11,060
13,144
2,824
15,940
Total assets
4,227
127,591
142,025
130,929
144,412
Long-term debt
—
69,300
68,600
68,950
67,726
Total liabilities
9,762
89,244
101,551
91,463
99,463
Total members' equity (deficit)
(5,535
)
38,347
40,474
39,466
44,949
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MANAGEMENT'S
    DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial
    condition and results of operations should be read together with
    "Selected Historical Consolidated Financial Data" and
    the consolidated financial statements and the related notes
    included elsewhere in this prospectus. The historical
    consolidated financial information discussed below reflects the
    historical results of operations of Archipelago Learning
    Holdings, LLC, which will be our wholly owned subsidiary after
    our corporate reorganization, and, except as indicated, the
    discussion below does not give effect to our corporate
    reorganization. See "Corporate Reorganization" for a
    description of our corporate reorganization. This discussion
    contains
forward-looking
statements, based on current expectations and related to future
    events and our future financial performance, that involve risks
    and uncertainties. Our actual results may differ materially from
    those anticipated in these forward-looking statements as a
    result of many factors, including those set forth under
    "Risk Factors," "Forward-Looking Statements"
    and elsewhere in this prospectus.
Overview
Archipelago Learning is a leading subscription-based online
    education company. We provide standards-based instruction,
    practice, assessments and productivity tools that improve the
    performance of educators and students via proprietary web-based
    platforms. Study Island, our core product line, helps students
    in Kindergarten through 12th grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the
2008-2009
school year, Study Island products were utilized by
    approximately 8.3 million students in over 19,200 schools
    in 50 states who answered over 2.8 billion of our
    practice questions. We recently began offering classroom and
    school website portals, digital lockers and teacher productivity
    tools through our TeacherWeb services and online postsecondary
    programs through our Northstar Learning product line.
We were founded in 2000. In 2001, we launched our first Study
    Island products in two states. By 2009, we developed Study
    Island products for all 50 states, expanded our content to
    include the subject areas of reading, writing, mathematics,
    social studies and science and grew from serving 57 schools in
    2001 to more than 19,200 schools. We further expanded our
    product offerings with our June 2008 acquisition of TeacherWeb,
    a website portal and teacher productivity tool that provides
    educators with simple, easy-to-use templates to create district,
    school or classroom websites. We entered the postsecondary
    educational market with the launch of Northstar Learning in
    April 2009, which uses the same web-based platform as our Study
    Island products to provide various instruction, assessment and
    exam preparation content. In addition, in August 2009, we made a
    minority investment in Edline, a private educational technology
    company.
We capitalize on two significant trends in the education market:
    (1) an increased focus on higher academic standards and
    educator accountability for student achievement, which has led
    to periodic assessment in the classroom to gauge student
    learning and inform instruction, also known as formative
    assessment, and (2) the increased availability and
    utilization of web-based technologies to enhance and supplement
    teacher instruction, engage today's technology-savvy
    learners and improve student outcomes.
In January 2007, investment funds affiliated with Providence
    Equity Partners, together with Cameron Chalmers and David Muzzo
    (our founders and vice presidents) and MHT-SI, LP, acquired 100%
    of the voting equity interests in Archipelago Learning Holdings,
    LLC, the parent of Archipelago Learning, LLC, which subsequently
    acquired substantially all of the assets of Study Island, LP,
    our predecessor. In connection with the acquisition:
•
Providence Equity Partners contributed approximately
    $84.5 million in cash for approximately 77.2% of the voting
    equity interests in Archipelago Learning Holdings, LLC;
•
Cameron Chalmers and David Muzzo each contributed
    $10.0 million, for a total of $20.0 million, for
    approximately 9.1% each, or a total of approximately 18.2%, of
    the voting equity interests in Archipelago Learning Holdings,
    LLC;
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•     MHT-SI, LP contributed
    approximately $5.0 million in cash for approximately 4.6%
    of the voting equity interests in Archipelago Learning Holdings,
    LLC;
•
With the cash contributed by Providence Equity Partners, Cameron
    Chalmers, David Muzzo and MHT-SI, LP, (i) Archipelago
    Learning, LLC purchased substantially all the assets of Study
    Island, LP for $100.0 million, (ii) Archipelago
    Learning, LLC paid $4.6 million in transaction costs
    related to the acquisition of the assets of Study Island, LP,
    and (iii) $5.0 million was retained by Archipelago
    Learning, LLC for general corporate purposes;
•
In November 2007, Archipelago Learning, LLC as borrower, and the
    other persons designated as credit parties from time to time,
    entered into a credit facility providing for a
    $70.0 million term loan and a $10.0 million revolving
    credit facility with General Electric Capital Corporation, as a
    lender and as agent for all lenders, NewStar Financial, Inc., as
    syndication agent, the other parties thereto as lenders and GE
    Capital Markets, Inc. and NewStar Financial, Inc., as joint lead
    arrangers and joint bookrunners; and
•
With the borrowings under our term loan and cash on hand,
    (i) Archipelago Learning, LLC paid $1.7 million in
    financing fees related to our credit facility,
    (ii) Archipelago Learning, LLC distributed
    $74.8 million of its proceeds under its term loan and cash
    on hand to Archipelago Learning Holdings, LLC, and
    (iii) Archipelago Learning Holdings, LLC made distributions
    of $74.8 million to the holders of its voting equity
    interests.
We refer to the foregoing transactions collectively as the
    "Providence Equity Transactions."
Prior to this offering, Archipelago Learning Holdings, LLC and
    its subsidiaries conducted our business. Immediately prior to
    the consummation of this offering, and in accordance with and as
    contemplated by the limited liability company agreement of
    Archipelago Learning Holdings, LLC, the holders of shares of
    Archipelago Learning Holdings, LLC, and certain of their
    affiliates will enter into the following transactions with
    Archipelago Learning, Inc., a newly formed Delaware corporation
    that will act as a holding company for our business:
•
The direct or indirect holders of Class A and
Class A-2 shares
of Archipelago Learning Holdings, LLC will, directly or
    indirectly, contribute all such Class A and
Class A-2 shares
of Archipelago Learning Holdings, LLC held by such parties to
    Archipelago Learning, Inc. in exchange for an aggregate
    of      shares of common stock;
•
Our officers, directors and employees who hold vested
    Class B shares of Archipelago Learning Holdings, LLC will
    contribute their vested Class B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of      shares of
    common stock;
•
Our officers, directors and employees who hold unvested
    Class B shares of Archipelago Learning Holdings, LLC will
    contribute their unvested Class B shares of Archipelago
    Learning Holdings, LLC to Archipelago Learning, Inc. in exchange
    for an aggregate of      shares of
    restricted common stock subject to time-based vesting;
•
Our officers, directors and employees (other than our chief
    executive officer, chief financial officer, chief technology
    officer and co-founders) who hold Class C shares of
    Archipelago Learning Holdings, LLC will contribute such
    Class C shares to Archipelago Learning, Inc. in exchange
    for an aggregate
    of           shares
    of common stock and an aggregate
    of          restricted
    stock unit awards subject to vesting based on, among other
    things, the trading price of our common stock;
•
Our chief executive officer, chief financial officer, chief
    technology officer and co-founders will contribute their
    Class C shares of Archipelago Learning Holdings, LLC to
    Archipelago Learning, Inc. in exchange for an aggregate
    of           shares
    of restricted common stock subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners and an aggregate
    of
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restricted stock unit awards subject to vesting based on, among
    other things, the cash returns to Providence Equity Partners in
    respect of shares of common stock held by Providence Equity
    Partners; and
•
Providence Equity Partners V-A Study Island L.L.C. and
    Providence Equity
Partners V-A
Study Island L.P., which will not have any assets other than
    their direct or indirect interests in Archipelago Learning
    Holdings, LLC, will merge with and into Archipelago Learning,
    Inc.
We refer to the transactions listed above as the "Corporate
    Reorganization."
For a more detailed discussion of the Class B and
    Class C shares, the restricted stock and the restricted
    unit awards see "Compensation Discussion and
    Analysis — Elements of Executive
    Compensation — Equity Compensation Plan."
As a result of the Corporate Reorganization, Archipelago
    Learning, Inc. will own all of the outstanding member interests
    of Archipelago Learning Holdings, LLC, will become the parent of
    Archipelago Learning Holdings, LLC and its subsidiaries, and
    will have no other assets or operations. Archipelago Learning,
    Inc. will be a Delaware "C" corporation, and as such
    will be subject to federal and state income taxes. Archipelago
    Learning Holdings, LLC was a limited liability company not
    subject to state or federal income taxes, and as such, the
    historical financial data included in this prospectus do not
    reflect what our financial position and results of operations
    would have been had we been a taxable corporation. We expect to
    record a net deferred tax asset and a corresponding credit to
    our provision for income taxes of approximately
    $      million upon becoming a
    "C" corporation immediately before the effectiveness
    of the registration statement of which this prospectus is a
    part. This deferred tax asset primarily results from the excess
    of the tax basis over the book basis of certain of our
    intangible assets. We expect to realize future reductions in our
    current tax expense as these intangibles are amortized and
    deducted from taxable income on our tax returns. Prior to the
    closing of this offering, Archipelago Learning Holdings, LLC
    intends to make additional cash distributions of approximately
    $1.4 million to the members of Archipelago Learning
    Holdings, LLC to enable them to meet their estimated income tax
    obligations for the period from January 1, 2009 to the date
    of the Corporate Reorganization. The amount of these
    distributions will be based on Archipelago Learning Holdings,
    LLC's estimated net taxable income from January 1,
    2009 to the date of the Corporate Reorganization. In addition,
    the board of managers of Archipelago Learning Holdings, LLC has
    authorized an $8.0 million distribution to its members in
    the third quarter of 2009. Purchasers of shares in this offering
    will not receive any of these distributions.
For more information on the Providence Equity Transactions and
    the Corporate Reorganization, see "Corporate
    Reorganization" and "Certain Relationships and Related
    Person Transactions."
Recent
    Developments
In August 2009, in conjunction with Providence Equity
    Partner's acquisition of Edline Holdings, Inc., or Edline,
    a private Chicago-based educational technology company, we made
    a strategic minority investment in Edline. We purchased 285,601
    Series A shares of Edline for $2.9 million,
    representing 7.1% of Edline's outstanding Series A
    shares. In addition, Edline borrowed $2.1 million from us
    pursuant to a five-year promissory note, which bears interest at
    9.5% per annum and requires semi-annual interest-only payments.
    In connection with these transactions, we received transaction
    fees of $0.2 million. Edline provides online Learning
    Community Management Systems, or LCMS, solutions that help
    schools improve student performance by harnessing the power of
    parental involvement, supporting teachers, and engaging the
    learning community. Services include web hosting, content
    management, information portals, tools for classroom management,
    gradebook, notification, student data analytics, virtual storage
    and related technologies.
We believe that we can benefit from strategic opportunities with
    Edline, as Edline is capitalizing on the same trends in the K-12
    education market as Study Island and TeacherWeb: (1) an
    increased focus on higher academic achievement and
    (2) increased availability and utilization of web-based
    technologies to enhance and supplement instruction and improve
    school to home communications. Accordingly, there are attractive
    strategic partnership opportunities between Archipelago Learning
    and Edline, including: (1) linking
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Study Island's content to Edline's school and district
    LCMS solutions; (2) co-marketing arrangements to capitalize
    on each company's customer base and sales force; and,
    (3) linking
and/or
sharing of web application functionality between Edline and
    TeacherWeb.
Components
    of Service Revenue and Expense
Service
    Revenue
Substantially all of our service revenue is generated from
    subscriptions for our products and services. For 2006, 2007,
    2008 and the first six months of 2009, subscription revenue
    accounted for 97.3%, 98.0%, 98.4% and 98.4% of our service
    revenue, respectively. Our subscription revenue is characterized
    as sales to new customers and sales to existing customers. We
    also generate service revenue from individual buys, which are
    individual purchases for access to a product, and from training
    fees, which are fees from customers for onsite or online
    training sessions that are primarily provided to new Study
    Island customers.
A significant portion of our service revenue has been and is
    expected to be generated by sales of our Study Island products
    to public schools and school districts, which rely on state,
    federal and local funding. State, federal and local educational
    funding is primarily funded through income or property taxes,
    and such tax revenue may increase or decrease as a result of
    general economic conditions and tax policies. The NCLB
    legislation passed in 2001 conditioned the receipt of federal
    funding for education on the establishment of educational
    standards, annual assessments and the achievement of adequate
    yearly progress milestones. In addition, budget appropriations
    for education at all levels of government are determined through
    the political process, and as a result, the funding that schools
    receive may fluctuate, which may impact our sales to schools in
    future periods.
Subscription revenue from our Study Island products accounted
    for 97.7%, 97.8%, 96.8% and 93.1% of our service revenue in
    2006, 2007, 2008 and the first six months of 2009, respectively,
    and we anticipate that service revenue from sales of our Study
    Island products will account for a substantial majority of our
    service revenue for the next few years. We also generate
    subscription revenue from our TeacherWeb service, which account
    for 2.0% and 4.8% of our service revenue in 2008 and the first
    six months of 2009, respectively. We have not yet generated
    significant subscription revenue from our Northstar Learning
    product line, which was launched in April 2009.
Pricing for Study Island subscriptions is based on a variety of
    factors. Subscriptions are priced on a fixed price per class or
    a variable price per school based on the number of students per
    grade using the products. In addition, subscriptions are priced
    on a per subject matter basis with discounts given if all of the
    subjects for a given grade are purchased. Subscription prices
    also vary by state based on the number, complexity and
    comprehensiveness of the applicable standards. Our Study Island
    products are specifically built from the varying assessment
    standards in all 50 states, which we believe differentiates us
    from our competitors. If national standards and assessments
    replace current state assessments, we may face increased
    competition as well. The average annual price per student per
    subject is $3.00, or $10.00 per student for all subjects.
Our subscription fees are typically billed and paid for in
    advance; however, we recognize subscription revenue ratably over
    the subscription term beginning on the commencement date of each
    subscription. The traditional subscription term is
    12 months for our Study Island products and TeacherWeb
    service and six months for our Northstar Learning product line.
    We occasionally sell multi-year subscriptions. In the case of
    certain sales, a limited number of additional months may be
    offered as a promotional incentive. All of our subscriptions are
    sold on a non-cancelable basis. From time to time, we may
    enhance or upgrade our products. Because we provide our products
    on a single web-based platform, all of our customers generally
    benefit from new features and functionality released during the
    subscription term at no additional cost.
Factors affecting our service revenue include: (i) the
    number of schools, classes or students purchasing our products;
    (ii) prices for our products; (iii) the term of the
    subscriptions; (iv) subscription renewals; (v) the
    number of states or geographies in which we offer products;
    (vi) the number of products we offer in a state or in a
    geographic region; (vii) the complexity and
    comprehensiveness of applicable standards, which impacts
    pricing; (viii) the effectiveness of our regional
    field-based and inside sales teams;
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(ix) recognition of service revenue in any period from
    deferred revenue from subscriptions purchased or renewed during
    the current and prior periods; (x) federal, state and local
    educational funding levels; and (xi) discretionary
    purchasing funds available to our customers.
The timing of sales to new Study Island customers, sales to
    existing Study Island customers and TeacherWeb sales is affected
    by seasonal trends associated with school budget years and state
    testing calendars. As a result, most new subscriptions and
    renewals occur in the third quarter because teachers and school
    administrators typically make purchases for the new academic
    year at the beginning of their district's fiscal year,
    which is usually July 1. The fourth calendar quarter has
    historically produced the second highest level of new
    subscriptions and renewals, followed by the second quarter and
    the first quarter. We anticipate that sales of our Northstar
    Learning products will be highest at the beginning of customary
    academic semesters in September and January. Because our service
    revenue is deferred over the course of the subscription period
    and our customers pay for their subscriptions at the beginning
    of the subscription period, this seasonality does not cause our
    service revenue to fluctuate significantly but does impact our
    cash flow.
As of June 30, 2009, more than 19,200 schools used Study
    Island products. A school is considered to be using our products
    if it has an active subscription for any or all of the Study
    Island products available to it. The number of schools using our
    products will increase as schools without active subscriptions
    purchase subscriptions for our products. The number of schools
    using our products will decrease if the schools do not renew
    their subscriptions. We generally contact schools several months
    in advance of the expiration of their subscription to attempt to
    secure renewal subscriptions. If a school does not renew its
    subscription within six months after its expiration, we
    categorize it as a lost school and our count of the number of
    schools using our products decreases. If the school subsequently
    purchases a subscription to our products after this renewal
    period, we consider it to be a new subscription. In 2008, we had
    a renewal rate of 77.1%, which reflects the percentage of
    schools that subscribed for our products in one period and then
    subscribed for our products again in the next period, within six
    months of their subscription end date.
Our subscription purchases are generally evidenced by a purchase
    order. We recognize an invoiced sale in the period in which the
    purchase order is received and the invoice is issued. Service
    revenue for invoiced sales is deferred and recognized ratably
    over the subscription term beginning on the commencement date of
    the applicable subscription.
The following table sets forth information regarding our
    invoiced sales as well as other metrics that impact our service
    revenue for the periods presented:
Predecessor
Successor
Year Ended
Year Ended
Six Months Ended
December 31,
December 31,
June 30,
2006
2007
2008
2008
2009
(In thousands)
Invoiced sales to new customers(1)(2)
$
7,021
$
11,222
$
14,099
$
6,759
$
6,550
Invoiced sales to existing customers(1)(3)
6,981
13,847
24,709
8,411
12,838
Invoiced other sales(1)(4)
502
794
1,053
557
544
Total TeacherWeb sales(5)
—
—
2,198
—
1,041
Total invoiced sales(1)
$
14,504
$
25,863
$
42,059
$
15,727
$
20,973
Service revenue
10,065
18,250
32,068
14,000
21,427
Change in deferred revenue(6)
4,439
7,613
9,991
1,727
(454
)
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Predecessor
Successor
At
December 31,
At December 31,
At June 30,
2006
2007
2008
2008
2009
Other metrics:
Number of schools using Study Island products(7)
7,856
13,100
17,307
15,441
19,214
Number of students using Study Island products(8)
3,000,000
5,000,000
8,311,501
7,380,000
8,340,400
Number of products available(9)
429
650
950
711
1,186
Number of states(10)
23
35
50
50
50
(1)
We present invoiced sales data to provide a supplemental measure
    of our operating performance. We believe the various invoiced
    sales metrics enable investors to evaluate our sales performance
    in isolation and on a consistent basis without the affects of
    service revenue deferral and service revenue recognition from
    sales in prior periods. In addition, invoiced sales to new
    customers and existing customers and invoiced other sales
    provide investors with important information regarding the
    source of orders for our products and services and our sales
    performance in a particular period. Invoiced sales are not
    recognized under GAAP and should not be used an as indicator of,
    or an alternative to, service revenue and deferred revenue.
    Invoiced sales metrics have significant limitations as
    analytical tools because they do not take into account the
    requirement to provide the applicable product or service over
    the subscription period and they do not match the recognition of
    services revenue with the associated cost of revenue.
(2)
Invoiced sales to new customers are recognized in the period in
    which the school or district purchase order is received and the
    invoice is issued. A new customer is any customer that is not
    considered to be an existing customer.
(3)
Invoiced sales to existing customers are recognized in the
    period in which the school or district purchase order is
    received and the invoice is issued. An existing customer is
    defined as any customer with an existing subscription to Study
    Island products. We generally contact schools several months in
    advance of the expiration of their subscription to attempt to
    secure renewal subscriptions. If a school does not renew its
    subscription within six months after its expiration, we
    categorize it as a lost school and our count of the number of
    schools using our products decreases. If the school subsequently
    purchases a subscription to our products after this renewal
    period, we consider it to be a new subscription.
(4)
Invoiced other sales include invoices from individual buys,
    which are individual purchases for access to a product, and from
    training fees, which are fees from customers for onsite or
    online training sessions that are primarily provided to new
    Study Island customers.
(5)
TeacherWeb sales are recognized at the point of sale and are not
    evaluated in the same manner as Study Island sales.
(6)
Our subscription fees are typically billed and paid for in
    advance. Revenue for invoiced sales is deferred and recognized
    ratably over the subscription term beginning on the commencement
    date of the applicable subscription. The traditional
    subscription term is 12 months for our Study Island
    products and TeacherWeb service and six months for our Northstar
    Learning product line.
(7)
A school is considered to be using our products if it has an
    active subscription for any or all of the Study Island products
    available to it.
(8)
The numbers of students using Study Island products is the
    number of registered user names. In 2006 and 2007, we did not
    track the number of registered user names and have provided
    calculated management estimates based on the best available data
    for those years.
(9)
A Study Island product is any one subject for one grade level in
    a single state. A Northstar Learning product is classified by
    subject.
footnotes continued on following page
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footnotes continued on following page
(10) The number of states is the number of states in which Study
    Island offers products, which are built from the standards of
    such states.
Cost
    of Revenue
Cost of revenue consists of the direct and indirect costs to
    host and make available our products and services to our
    customers. A significant portion of the cost of revenue includes
    salaries, bonuses, stock-based compensation, employee benefits
    costs and taxes related to engineering personnel who maintain
    our servers and technical equipment and who work on our
    web-based hosted platform. The employee benefits costs and taxes
    are allocated based upon a percentage of total compensation
    expense. Other direct and indirect costs include recruiting and
    relocation fees associated with engineering and product
    development employees, contracted labor, facility costs for our
    web platform servers and routers, including backup servers that
    are maintained in colocation facilities in Dallas, Texas,
    depreciation expense on those servers and routers, network
    monitoring costs and amortization of Study Island's
    technical development intangible asset as a result of the
    Providence Equity Transactions.
Operating
    Expense
We classify our operating expense into three categories: sales
    and marketing, content development, and general and
    administrative. All of the categories include personnel costs.
    Personnel costs for each category of operating expense include
    salaries, bonuses, stock-based compensation, employee benefits
    costs and taxes. Personnel costs for sales and marketing expense
    also include sales commissions. Salary increases are generally
    given in January of each year. Bonuses are expensed monthly as
    they accrue based on management's estimate of the expected
    bonus amounts, and are actually paid to most employees and sales
    management personnel in July and January. These bonuses are
    based on a combination of business and individual performance
    for the first six months and the last six months of the year.
    Senior management bonuses are generally paid in the first
    quarter of the year, after the results for the prior year are
    known. Sales commissions are generally paid as a percentage of
    sales to new and existing customers, and are paid in the month
    the customer's purchase order is received.
Sales and Marketing Expense.
Our sales and
    marketing expense consists primarily of personnel expense,
    direct marketing costs, travel and entertainment expense, and
    the amortization of customer relationships as an intangible
    asset. Personnel expense has increased significantly since 2005
    as we increased our sales and marketing headcount to
    113 employees at June 30, 2009 from 31 employees
    at December 31, 2006 as a result of the growth in our Study
    Island product line, the TeacherWeb acquisition and the launch
    of our Northstar Learning product line. In addition, our sales
    commissions increased during this period primarily as a result
    of an increased number of sales representatives and higher Study
    Island sales volume. Our employees have also received
    market-driven merit increases in their base salaries during this
    period. Marketing expense consists of direct mail costs, email
    prospecting expense, "pay per click" advertising
    costs, search engine optimization costs, printed material costs,
    marketing research expense, and trade show expense. Marketing
    expense generally increases as our sales efforts increase, both
    in new and existing markets. Our marketing efforts are related
    to the launch of new product offerings, the introduction of our
    products and services in new states and geographic regions, and
    opportunities within a selected market associated with specific
    events (e.g., timing for the standardized testing in a
    particular state, upcoming trade shows, etc.).
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Sales and marketing expense also includes the amortization of
    customer relationship costs as a result of the Providence Equity
    Transactions and the acquisition of TeacherWeb in June 2008.
Content Development Expense.
Our content
    development expense primarily consists of personnel costs for
    our content development employees, who are responsible for
    writing the questions for our Study Island and Northstar
    Learning products, and program content amortization expense. Our
    content development personnel costs have increased significantly
    since 2006 as we increased headcount to 46 at June 30, 2009
    from 12 at December 31, 2006 to support the development of
    new Study Island products for each state and the expanded number
    of subjects and grades covered by our Study Island products.
General and Administrative Expense.
Our
    general and administrative expense includes personnel costs for
    general and administrative employees, accounting and legal
    professional services fees, rent, insurance, travel and
    entertainment expense, and other corporate expense. General and
    administrative expense increased as a result of the expansion of
    our Dallas office space in 2007 and 2008 and the implementation
    of a new financial system and new accounting system 2008 and
    2009. We expect other operating expense to increase in future
    periods as we expect to incur additional expense associated with
    being a public company, including increased personnel costs,
    legal costs, accounting costs, board compensation expense,
    investor relations costs, higher insurance premiums, and costs
    associated with our compliance with Section 404 of the
    Sarbanes-Oxley Act of 2002, other applicable SEC regulations and
    the requirements of the NYSE or Nasdaq.
Other
    Income (Expense)
Our other income (expense) includes the interest expense on our
    $70.0 million term loan and $10.0 million revolving
    credit facility entered into in November 2007 and amortization
    of debt financing costs. We borrowed $10.0 million under
    our revolving credit facility in September 2008 and we repaid
    the full amount in November 2008. No amounts were outstanding
    under the revolving credit facility at June 30, 2009. The
    amounts borrowed under our term loan bear interest at rates
    based upon either a base rate or LIBOR, plus an applicable
    margin. We also earn interest income on our cash and cash
    equivalents investments which is included in other income. We
    utilize an interest rate swap, required by the terms of our
    credit facility, as part of our overall risk management
    strategy. We entered into the swap arrangement in December 2007
    with an initial notional amount of $45.5 million. In June
    2009, the notional amount of the interest rate swap decreased to
    $40.5 million and will decrease in periodic amounts to a
    notional amount of $30.5 million at the December 31,
    2010 termination date. We swapped a floating rate payment based
    on the three-month LIBOR for a fixed rate of 4.035% in order to
    minimize the variability in expected future cash flow due to
    interest rate movements on our LIBOR-base variable rate debt. We
    have not designated our interest rate swap as a cash flow hedge.
    The unrealized changes in the derivative fair value are recorded
    as a derivative gain (loss) in other income or expense as well
    as the realized interest income
and/or
expense associated with the swap.
Income
    Tax Expense
Income tax expense is comprised of federal, state, local and
    foreign taxes based on our income in the appropriate
    jurisdictions. Prior to the Corporate Reorganization,
    Archipelago Learning Holdings, LLC was treated as a partnership
    and was not a taxpaying entity for federal income tax purposes
    and generally is not a tax paying entity for state income tax
    purposes. As a result, Archipelago Learning Holdings, LLC's
    income was taxed to its members in their individual federal
    income tax returns. TeacherWeb was and is, treated as a taxable
    corporation for federal income tax purposes. In 2008, we
    recorded a $0.2 million federal and state income tax
    benefit for TeacherWeb. We are also subject to certain franchise
    taxes and we record these expenses in our income tax expense.
Other
    Considerations
Equity Compensation Expense.
As members of a
    private limited liability company, our members' interests
    consisted of Class A,
Class A-2,
Class B and Class C shares. Management and other
    employees were granted Class B and Class C shares
    under our 2007 Equity Compensation Plan. For the years ended
    December 31, 2007 and 2008 and for the first six months of
    2009, we recognized approximately $0.6 million,
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$0.4 million and $0.2 million, respectively, as
    stock-based compensation expense. Upon completion of this
    offering, these shares will be converted into shares of common
    stock of Archipelago Learning, Inc. See "Corporate
    Reorganization" and "— Overview."
    Management's participation shares will convert into common
    stock, restricted common stock and restricted stock unit awards.
    In addition, in connection with this offering, we intend to
    implement the 2009 Omnibus Incentive Plan. We expect to grant
    additional stock options, restricted stock, restricted stock
    unit awards and other forms of equity-based compensation under
    that plan after the offering, which will result in the
    incurrence of equity compensation expense.
Providence Equity Transactions.
As a result of
    the Providence Equity Transactions in 2007, our interest expense
    and our depreciation and amortization expense have increased.
    Accordingly, our consolidated financial statements prior to
    January 2007 are not comparable to subsequent period, primarily
    as a result of significantly increased interest expense and
    depreciation and amortization expense.
Corporate Reorganization.
Immediately prior to
    the consummation of this offering, we will reorganize our
    corporate structure so that the top-tier entity in our corporate
    structure – the entity whose common stock is being
    offered to the public in this offering – is a
    corporation rather than a limited liability company. See
    "Corporate Reorganization" and
    "— Overview."
Critical
    Accounting Policies
Our discussion and analysis of our consolidated financial
    condition and results of operations are based upon our
    consolidated financial statements, which have been prepared in
    accordance with accounting principles generally accepted in the
    United States, or U.S. GAAP. The preparation of these
    financial statements requires us to make estimates and judgments
    that affect the reported amounts of assets, liabilities, revenue
    and expense, and related disclosure of contingent assets and
    liabilities. On an ongoing basis, we evaluate our estimates
    including those related to long-lived intangible and tangible
    assets, goodwill and stock-based compensation. We base our
    estimates on historical experience and on various other
    assumptions that are believed to be reasonable under the
    circumstances. Actual results may differ from these estimates
    under different assumptions or conditions. All intercompany
    balances and transactions have been eliminated in consolidation.
The accounting policies we believe to be most critical to
    understanding our results of operations and financial condition
    and that require complex and subjective management judgments are
    discussed below.
Revenue Recognition.
We generate service
    revenue from subscription revenue, which consists of
    subscription fees, training fees, and individual buys, which are
    individual purchases for access to our products. For the six
    months ended June 30, 2008 and 2009, subscription revenue
    accounted for 99.1% and 98.4% of our service revenue,
    respectively.
Service revenue is recognized when all of the following
    conditions are satisfied: there is persuasive evidence of an
    arrangement, the service has been provided to the customer, the
    collection of the fees is reasonably assured, and the amount of
    the fees to be paid by the customer is fixed or determinable.
    Our arrangements do not contain general rights of return.
Our subscription fees are typically billed and paid for in
    advance; however, we recognize subscription revenue ratably over
    the subscription term beginning on the commencement date of each
    subscription. We defer the total amount of the sale of
    subscriptions, training, and support as unearned revenue when
    the customer is invoiced and recognize the revenue on a
    straight-line basis over the subscription period. The
    traditional subscription term is 12 months for our Study
    Island products and TeacherWeb service and six months for our
    Northstar Learning products. We occasionally sell multi-year
    subscriptions. In the case of certain sales, a limited number of
    additional months may be offered as a promotional incentive. All
    of our subscriptions are sold on a non-cancelable basis. As a
    result, substantially all of the service revenue that we
    recognize in any period are deferred revenue from subscriptions
    purchased or renewed during current and previous periods. Our
    service revenue from training fees is also recognized ratably
    over the subscription term for the related subscription. From
    time to time, we may enhance or upgrade our products. Because we
    provide
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our products on a single web-based platform, all of our
    customers generally benefit from new features and functionality
    released during the subscription term at no additional cost.
Training sessions are offered to our customers in conjunction
    with the subscriptions to train the customers on implementing,
    using, and administering the Study Island programs. Training
    revenue is recognized over the life of the subscription.
    Customer support is provided to customers following the sale at
    no additional charge and at a minimal personnel cost per call.
Goodwill, Intangible Assets and Long-Lived
    Assets.
Goodwill represents the excess of the
    cost of an acquisition over the fair value of net assets
    acquired. In accordance with FASB Statement No. 142,
Goodwill and Other Intangible Assets
, goodwill is
    assessed for impairment at the reporting unit level at least
    annually and any time an event occurs or circumstances change
    that would more likely than not reduce the fair value of the
    goodwill below its carrying value. The goodwill impairment test
    involves a two-step test. The first step is a comparison of each
    reporting unit's fair value to its carrying value. If the
    carrying value of a reporting unit exceeds its fair value,
    goodwill is considered potentially impaired and we must complete
    the second step of the impairment test. The amount of impairment
    is determined by comparing the implied fair value of reporting
    unit goodwill to the carrying value of the goodwill in the same
    manner as if the reporting unit was being acquired in a business
    combination. Specifically, we would allocate the fair value to
    all of the assets and liabilities of the reporting unit,
    including internally developed intangible assets with a zero
    carrying value, in a hypothetical analysis that would calculate
    the implied fair value of goodwill. If the implied fair value of
    goodwill is less than the recorded goodwill, we would recognize
    an impairment charge for the difference.
Fair value of the reporting units are determined using an income
    approach. The income approach uses a reporting unit's
    projection of estimated cash flows discounted using a
    weighted-average cost of capital analysis that reflects current
    market conditions.
Our judgment is a significant factor in determining whether an
    indicator of impairment has occurred. We rely on estimates in
    determining the fair value of each reporting unit, which include
    the following critical quantitative factors:
•
Anticipated future cash flows and terminal value for each
    reporting unit.
The income approach to
    determining the fair value relies on the timing and estimates of
    future cash flows, including an estimate of terminal value. The
    projections use management's estimates of economic and
    market conditions over the projected period including growth
    rates in service revenue, customer attrition and estimates of
    any expected changes in operating margins. Our projections of
    future cash flows are subject to change as actual results are
    achieved that differ from those anticipated. Because management
    frequently updates its projections, we would expect to identify
    on a timely basis any significant differences between actual
    results and recent estimates. We are not expecting actual
    results to vary significantly from estimates.
•
Selection of an appropriate discount rate.
The
    income approach requires the selection of an appropriate
    discount rate, which is based on a weighted-average cost of
    capital analysis. The discount rate is affected by changes in
    short-term interest rates and long-term yield as well as
    variances in the typical capital structure of marketplace
    participants in the security monitoring industry. The discount
    rate is determined based on assumptions that would be used by
    marketplace participants, and for that reason, the capital
    structure of selected marketplace participants is used in the
    weighted-average cost of capital analysis. Given the current
    volatile general economic conditions, it is possible that the
    discount rate will fluctuate in the near term.
We perform our annual impairment tests in the fourth quarter of
    each year. No goodwill impairment under any approach was
    identified in 2007 and 2008.
Intangible assets and other long-lived assets are reviewed for
    impairment when events or changes in circumstances indicate the
    carrying amount may not be recoverable, in accordance with FASB
    Statement No. 144,
Accounting for Impairment or Disposal
    of Long-Lived Assets
. If impairment indicators exist, the
    amount of impairment recognized is the amount by which the
    carrying value exceeds fair value. An assessment of undiscounted
    future cash flows to be generated by such assets is made. If the
    results of the
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analysis indicate impairment, the assets are adjusted to fair
    market value. Long-lived assets are reviewed for impairment when
    events or changes in circumstances indicate the carrying value
    may not be recoverable. Intangible assets with finite lives are
    amortized using the straight-line method over their estimated
    useful lives. No intangible or long-lived assets impairment loss
    was identified in 2006, 2007 and 2008.
Stock-Based Compensation Expense.
We have
    adopted FASB Statement No. 123(R),
Accounting for
    Stock-Based Compensation
. FASB Statement No. 123(R)
    addresses accounting for share-based awards and requires
    companies to record compensation expense for share-based awards
    issued to employees and directors in exchange for services
    provided. The amount of the compensation expense is based on the
    estimated fair value of the awards on their grant dates and is
    recognized over the required service or performance periods of
    the awards.
In the first six months of 2009, we granted various members of
    management a total of 673,287 Class B shares and 673,287
    Class C shares representing a total grant-date fair value
    of $0.2 million and $40,397, respectively. For the six
    months ended June 30, 2009, $0.2 million was
    recognized as stock-based compensation expense. At June 30,
    2009, the total compensation cost related to unvested
    participation shares not yet recognized was approximately
    $1.0 million, which will be recognized over the remaining
    vesting periods. In 2007 and 2008, we granted to various members
    of management a total of 5,720,692 and 456,336 Class B
    shares representing a total grant-date fair value of
    $1.8 million and $0.1 million, respectively. In 2007
    and 2008, we also granted to various members of management
    5,720,692 and 456,336 Class C shares representing total
    grant-date fair value of $0.3 million and $31,944,
    respectively. The grant-date fair value of the Class B and
    Class C shares was recognized as stock-based compensation
    over the required service period, which is typically five years
    for Class B shares. Holders of Class C shares are
    entitled to distributions after holders of Class A and
Class A-2 shares
receive certain threshold multiples of cash-based returns on
    their respective Class A and
Class A-2 shares,
subject to such Class C share holders' continued
    employment by us. For the years ended December 31, 2007 and
    2008, $0.6 million and $0.4 million, respectively, was
    recognized as stock-based compensation expense. At
    December 31, 2008, the total compensation cost related to
    unvested participation shares not yet recognized was
    approximately $1.0 million, which will be recognized over
    the remaining vesting period.
The estimated fair value of the awards was determined by our
    board of managers after taking into account (i) the nature
    of the business and the history of our business from its
    inception, (ii) the economic outlook in general and the
    condition and outlook of our industry, (iii) the book value
    of the stock and financial condition of our business,
    (iv) our earning capacity, (v) our dividend-paying
    capacity, (vi) our goodwill or other intangible value,
    (vii) prior sales of our equity and the size of the block
    to be valued and (viii) the market price of stock in
    corporations engaged in similar businesses, whose stock is
    actively traded in a free and open market. We valued the awards
    primarily based on a comparison to similar businesses, business
    ownership interests or securities that have been sold. We
    evaluated pricing multiples derived from transactions of
    companies in the same or a similar line of business and also
    derived from market prices of stocks of companies in the same or
    similar line of business as us. We focused on transactions that
    involved companies engaged in educational services that were
    technology based.
Accounts Receivable.
We carry our accounts
    receivable at cost, less an allowance for doubtful accounts,
    which is based on management's assessment of the
    collectability of accounts receivable. We extend unsecured
    credit to our customers in the ordinary course of business, but
    mitigate the associated credit risk by performing ongoing credit
    evaluations of our customers. The vast majority of our customers
    are public schools, which receive their funding from the local,
    state and federal government. We evaluate the adequacy of the
    allowance for doubtful accounts based on a specific customer
    review of the outstanding accounts receivable.
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Results
    of Operations
The following table sets forth our consolidated statement of
    income for the periods indicated:
Predecessor
Successor
Year Ended
Six Months Ended
December 31,
Year Ended December 31,
June 30,
2006
2007
2008
2008
2009
(Unaudited)
(In thousands)
Consolidated Statements of Income
Service revenue
$
10,065
$
18,250
$
32,068
$
14,000
$
21,427
Cost of revenue
343
750
2,178
703
1,782
Gross profit
9,722
17,500
29,890
13,297
19,645
Operating expense
Sales and marketing
2,793
7,669
13,193
6,195
6,972
Content development
712
1,206
2,162
926
1,588
General and administrative
2,581
5,010
6,644
2,310
4,417
Total operating expense
6,086
13,885
21,999
9,431
12,977
Income from operations
3,636
3,615
7,891
3,866
6,668
Other income (expense)
Interest expense
—
(838
)
(5,161
)
(2,745
)
(1,377
)
Interest income
27
343
247
160
14
Derivative loss
—
(173
)
(2,119
)
(309
)
(141
)
Total other income (expense)
27
(668
)
(7,033
)
(2,894
)
(1,504
)
Income before income taxes
3,663
2,947
858
972
5,164
(Provision) benefit for income taxes
—
(23
)
164
(42
)
(133
)
Net income
$
3,663
$
2,924
$
1,022
$
930
$
5,031
Comparison
    of Six Months Ended June 30, 2009 to Six Months Ended
    June 30, 2008
Service revenue.
Our service revenue for the
    six months ended June 30, 2009 was $21.4 million,
    representing an increase of $7.4 million, or 53.1%, as
    compared to service revenue of $14.0 million for the six
    months ended June 30, 2008. This increase in service
    revenue reflected the increase in deferred revenue from
    subscriptions purchased or renewed during current and previous
    periods. For a description of metrics affecting our service
    revenue, including invoiced sales and deferred revenue, see
    "— Components of Service Revenue and
    Expense — Service Revenue." We implemented an
    average price increase for our Study Island products of 6.5% in
    August 2008, which was reflected in our service revenue for the
    six months ended June 30, 2009. The acquisition of
    TeacherWeb in June 2008 contributed an additional
    $1.2 million of service revenue during the six months ended
    June 30, 2009.
Cost of revenue.
Cost of revenue for the six
    months ended June 30, 2009 increased by $1.1 million,
    or 153.5%, to $1.8 million from $0.7 million for the
    six months ended June 30, 2008. This increase in cost of
    revenue was primarily attributable to a $0.9 million
    increase in engineering personnel costs resulting from the
    increased headcount resulting in part from the acquisition of
    TeacherWeb. Our total engineering headcount increased from 11 at
    June 30, 2008 to 25 at June 30, 2009.
Sales and Marketing Expense.
Sales and
    marketing expense for the six months ended June 30, 2009
    increased by $0.8 million, or 12.5%, to $7.0 million
    from $6.2 million for the six months ended June 30,
    2008. This increase was primarily attributable to a
    $0.4 million increase in personnel costs resulting in part
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from the acquisition of TeacherWeb, a $0.1 million increase
    in related marketing expense and $0.2 million in
    amortization expense related to TeacherWeb's customer
    relationship amortization.
Content Development Expense.
Content
    development expense for the six months ended June 30, 2009
    increased by $0.7 million, or 71.5%, to $1.6 million
    from $0.9 million for the six months ended June 30,
    2008. This increase was primarily attributable to a
    $0.6 million increase in personnel costs related to the
    completion of the development of Study Island products for all
    50 states and the development of content for our Northstar
    Learning product line. Headcount for content development
    increased to 46 employees at June 30, 2009 from
    38 employees at June 30, 2008.
General and Administrative Expense.
General
    and administrative expense for the six months ended
    June 30, 2009 increased by $2.1 million, or 91.2%, to
    $4.4 million from $2.3 million for the six months
    ended June 30, 2008. This increase was primarily
    attributable to a $1.1 million increase in personnel costs,
    $0.2 million in costs related to investigating potential
    acquisitions, $0.1 million related to increased accounting
    fees associated with our audit of 2008, 2007 and 2006 in
    preparation for this offering, a $0.1 million increase in
    rent associated with our increased office space,
    $0.1 million related to increased telephone and internet
    expense to support additional employees, and increased
    depreciation expense of $0.3 million associated with our
    capital expenditures.
Other Income (Expense).
Interest income for
    the six months ended June 30, 2009 decreased by
    $0.1 million, or 91.3%, to $14,000 from $0.2 million
    for the six months ended June 30, 2008. This decrease was
    primarily due to the lower interest earnings rates on higher
    average cash balances maintained during the first six months of
    2009 as compared to the first six months of 2008. Interest
    expense for the six months ended June 30, 2009 was
    $1.4 million, representing a decrease of $1.4 million,
    or 49.8%, as compared to $2.7 million for the six months
    ended June 30, 2008. This lower interest expense was
    primarily due to a combination of reduced debt levels, lower
    LIBOR levels and reduced applicable margin under our term loan
    as a result of our reduced leverage ratio during the applicable
    period. The loss on our interest rate swap for the six months
    ended June 30, 2009 was $0.1 million, representing a
    decrease of $0.2 million, or 54.4%, as compared to the loss
    of $0.3 million for the six months ended June 30,
    2008. This was due to the less volatile changes in the fair
    value of the derivative as recorded in the consolidated
    statements of income.
Net Income.
Net income for the six months
    ended June 30, 2009 increased by $4.1 million, or
    441.0%, to $5.0 million from $0.9 million for the six
    months ended June 30, 2008. This increase in net income was
    due to the $7.4 million increase in the service revenue
    that we recognized in the six months ended June 30, 2009
    from deferred revenue from subscriptions purchased or renewed
    during current and previous periods. This increase was partially
    offset by the $1.1 million increase in cost of revenue and
    $3.5 million increase in operating expense as noted above.
    Net income for this period also increased due to the lower
    interest expense incurred under our credit facility due to the
    combination of reduced debt levels, lower LIBOR levels and the
    reduced applicable margin under our term loan.
Comparison
    of Years Ended December 31, 2008 and December 31,
    2007
Service revenue.
Service revenue for the year
    ended December 31, 2008 increased by $13.8 million, or
    75.7%, to $32.1 million from $18.3 million for the
    year ended December 31, 2007. This increase in revenue was
    primarily attributable to the increase in the service revenue
    that we recognized for the year ended December 31, 2008
    from deferred revenue from subscriptions purchased or renewed
    during current and previous periods. For a description of
    certain metrics affecting our service revenue, including
    invoiced sales and deferred revenue, see
    "— Components of Service Revenue and
    Expense — Service Revenue." The increase in
    service revenue in 2008 was impacted by the release of
    additional Study Island products during 2007 and 2008. We
    implemented an average price increase for our Study Island
    products of 6.5% in August 2008. The acquisition of TeacherWeb
    in June 2008 contributed an additional $0.7 million in
    service revenue for the year ended December 31, 2008.
Cost of revenue.
Cost of revenue for the year
    ended December 31, 2008 increased by $1.4 million, or
    190.4%, to $2.2 million from $0.8 million for the year
    ended December 31, 2007. This increase in cost of revenue
    was primarily attributable to a $0.9 million increase in
    personnel costs resulting from an increase in
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engineering headcount from 9 at December 31, 2007 to 23 at
    December 31, 2008. In addition, we incurred
    $0.3 million of expense attributable to the acquisition of
    TeacherWeb and $0.3 million of expense related to
    facilities, network security, recruiting and depreciation.
Sales and Marketing Expense.
Sales and
    marketing expense for the year ended December 31, 2008
    increased by $5.5 million, or 72.0%, to $13.2 million
    from $7.7 million for the year ended December 31,
    2007. This increase was primarily attributable to
    $4.4 million in increased personnel costs related to the
    expansion of the Study Island sales team, $0.4 million of
    marketing expense related to new product releases,
    $0.3 million for additional contract labor and a
    $0.2 million increase in customer relationship amortization
    resulting from our acquisition of TeacherWeb in June 2008.
    Headcount for sales and marketing increased to
    114 employees at December 31, 2008 from
    88 employees at December 31, 2007.
Content Development Expense.
Content
    development expense for the year ended December 31, 2008
    increased by $1.0 million, or 79.3%, to $2.2 million
    from $1.2 million for the year ended December 31,
    2007. This increase was primarily attributable to a
    $0.9 million increase in personnel costs. Headcount for
    content development increased to 44 employees at
    December 31, 2008 from 20 at December 31, 2007.
General and Administrative Expense.
General
    and administrative expense for the year ended December 31,
    2008 increased by $1.6 million, or 32.6%, to
    $6.6 million from $5.0 million for the year ended
    December 31, 2007. This increase was primarily attributable
    to accounting expense and subscription fees to an online service
    associated with the implementation of a new financial system in
    January 2008, increased bank fees associated with our term loan
    and revolving credit facility, increased expense associated with
    mergers and acquisition activities, and increased rent expense
    due to our leasing additional office space in Dallas to support
    additional Dallas-based employees. Depreciation expense
    increased by $0.2 million from the year ended
    December 31, 2007 as compared to the year ended
    December 31, 2008.
Other Income (Expense).
Interest income for
    the year ended December 31, 2008 decreased by
    $0.1 million, or 28.0%, to $0.2 million from
    $0.3 million for the year ended December 31, 2007.
    This decrease was due to higher average cash balances during
    2008 offset by lower prevailing interest rates during 2008.
    Interest expense for the year ended December 31, 2008 was
    $5.2 million, representing an increase of $4.3 million
    as compared to interest expense of $0.8 million for the
    year ended December 31, 2007. This higher interest expense
    was due to the full year effect of borrowings under the term
    loan that we entered into in November 2007. Other expense also
    increased for the year ended December 31, 2008 as compared
    to the year ended December 31, 2007, due to the derivative
    loss of $2.1 million in the year ended December 31,
    2008, which reflects an increase of $1.9 million over as
    compared to a $0.2 million loss for the prior year. This
    loss was due to the fair value changes for our interest rate
    swap recorded in our statements of income.
Net income.
Net income decreased by
    $1.9 million, or 65.0%, to $1.0 million from
    $2.9 million for the year ended December 31, 2007.
    This decrease in net income was due to a $1.4 million
    increase in cost of revenue and an $8.1 million increase in
    operating expense as discussed above, an $4.3 million
    increase in interest expense associated with the full year
    effect of borrowings under the term loan we entered into in
    November 2007 and an increase in derivative losses of
    $1.9 million due to the fair value changes for our interest
    rate swap, which were offset in part by the $13.8 million
    increase in service revenue for the year ended December 31,
    2008.
Comparison
    of Years Ended December 31, 2007 and December 31,
    2006
Service revenue.
Service revenue for the year
    ended December 31, 2007 increased by $8.2 million, or
    81.3%, to $18.3 million from $10.1 million for the
    year ended December 31, 2006. This increase was primarily
    attributable to the increase in the service revenue that we
    recognized for the year ended December 31, 2007 from
    deferred revenue from subscriptions purchased or renewed during
    current and previous periods as compared to the service revenue
    recognized for the year ended December 31, 2006. For a
    description of certain metrics affecting our service revenue,
    including invoiced sales and deferred revenue, see
    "— Components of Service Revenue and
    Expense — Service Revenue." We implemented an
    average price increase for our Study Island products of
    approximately 12% in August 2007.
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Cost of revenue.
Cost of revenue for the year
    ended December 31, 2007 increased by $0.4 million, or
    118.7%, to $0.8 million from $0.3 million for the year
    ended December 31, 2006. This increase in cost of revenue
    was primarily attributable to an increase in engineering
    personnel costs.
Sales and Marketing Expense.
Sales and
    marketing expense for the year ended December 31, 2007
    increased by $4.9 million, or 174.6%, to $7.7 million
    from $2.8 million for the year ended December 31,
    2006. This increase was primarily attributable to a
    $2.7 million increase in personnel expense related to
    expanding the Study Island sales team, a $0.5 million
    increase in marketing expense related to increased product
    releases and a $0.3 million increase in expense related to
    contract labor. Headcount for sales and marketing increased to
    88 employees at December 31, 2007 from
    31 employees at December 31, 2006. Amortization cost
    specifically related to customer relationships increased by
    $1.3 million in connection with the Providence Equity
    Transactions.
Content Development Expense.
Content
    development expense for the year ended December 31, 2007
    increased by $0.5 million, or 69.4%, to $1.2 million
    from $0.7 million for the year ended December 31,
    2007. This increase is primarily attributable to a
    $0.4 million increase in personnel expense. In addition,
    $0.2 million is attributable to increased amortization of
    our content intangible asset related to the purchase of Study
    Island, LP in January 2007 in connection with the Providence
    Equity Transactions.
General and Administrative Expense.
General
    and administrative expense for the year ended December 31,
    2007 increased by $2.4 million, or 94.1%, to
    $5.0 million from $2.6 million for the year ended
    December 31, 2006. This increase was primarily attributable
    to a $1.3 million increase in personnel expense related to
    headcount which included hiring of our chief executive officer
    and chief financial officer and costs associated with bonus
    payments made to such personnel in connection with the
    Providence Equity Transactions, $0.2 million increase in
    rent expense due to the expansion of our Dallas office and
    additional increases related to increased telephone and internet
    expense to support additional employees, increased accounting
    expense in connection with entry into our term loan and
    revolving credit facility, and the implementation of a new
    financial system.
Other income (expense).
Interest income for
    the year ended December 31, 2007 increased by
    $0.3 million, or 1170.4%, to $0.3 million from $27,000
    for the year ended December 31, 2006. This increase was due
    to maintaining higher average cash balances in 2007 as compared
    to 2006. Interest expense for the year ended December 31,
    2007 was $0.8 million. We did not incur interest expense in
    2006. This higher interest expense was due to borrowings under
    our term loan that we entered into in November 2007. We incurred
    $0.2 million of derivative losses in 2007 due to the fair
    value changes for the interest rate swap that we entered into in
    November 2007.
Net income.
Net income for the year ended
    December 31, 2007 decreased by $0.7 million, or 20.2%,
    to $2.9 million from $3.7 million for the year ended
    December 31, 2006. This decrease in net income was due to a
    $0.4 million increase in cost of revenue, a
    $7.8 million increase in operating expense as noted above,
    a $0.8 million increase in interest expense associated with
    the borrowings under our term loan, $0.2 million in
    derivative losses, which were offset in part by the
    $8.2 million increase in service revenue and interest
    income of $0.3 million for the year ended December 31,
    2007.
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Quarterly
    Information
The following tables set forth selected unaudited quarterly
    consolidated statements of income data for the six most recent
    quarters. The information for each of these quarters has been
    prepared on the same basis as the audited consolidated financial
    statements included in this prospectus and, in the opinion of
    management, includes all adjustments necessary for the fair
    presentation of the results of operations for such periods. This
    data should be read in conjunction with the audited consolidated
    financial statements and the related notes included in this
    prospectus. These quarterly operating results are not
    necessarily indicative of our operating results for any future
    period.
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
2008
2008
2008
2008
2009
2009
(In thousands, except share data)
Service revenue
$
6,844
$
7,156
$
8,319
$
9,749
$
10,539
$
10,888
Cost of revenue
312
391
550
925
919
863
Gross profit
6,532
6,765
7,769
8,824
9,620
10,025
Operating expense
Sales and marketing
3,356
2,839
3,321
3,677
3,304
3,668
Content development
425
501
570
666
836
752
General and administrative
896
1,414
2,322
2,012
2,094
2,323
Total operating expense
4,677
4,754
6,213
6,355
6,234
6,743
Income from operations
1,855
2,011
1,556
2,469
3,386
3,282
Other income (expense)
Interest expense
(1,556
)
(1,189
)
(1,228
)
(1,188
)
(740
)
(637
)
Interest income
90
70
34
53
8
6
Derivative gain (loss)
(1,305
)
996
(548
)
(1,262
)
(60
)
(81
)
Total other income (expense)
(2,771
)
(123
)
(1,742
)
(2,397
)
(792
)
(712
)
Income (loss) before income taxes
(916
)
1,888
(186
)
72
2,594
2,570
(Provision) Benefit for income taxes
(21
)
(21
)
53
153
(58
)
(75
)
Net (loss) income
$
(937
)
$
1,867
$
(133
)
$
225
$
2,536
$
2,495
Net income (loss) per equity share attributable to members'
    equity
Basic and diluted
$
(0.01
)
$
0.02
$
0.00
$
0.00
$
0.02
$
0.02
Weighted average equity shares and equivalents outstanding
Basic and diluted
109,545
109,545
109,545
109,545
109,545
109,545
Liquidity
    and Capital Resources
Our primary cash requirements include the payment of our
    operating expense, interest and principal payments on our debt,
    and capital expenditures. We also have used cash to make
    dividend payments and tax-related distributions to our equity
    holders. We finance our operations primarily through cash flow
    from operations, which is typically the highest in the third and
    fourth quarters when sales of our Study Island and TeacherWeb
    products are highest and invoices are paid. Our cash flow from
    operations is typically flat in the first and second quarters.
    In November 2007, we entered into a six-year $70.0 million
    term loan and into a $10.0 million revolving credit
    facility. We used the proceeds of the term loan and cash on hand
    to make a make a dividend payment to the equity holders of
    Archipelago Learning Holdings, LLC in November 2007. We repaid
    $0.9 million in principal on our term loan during the six
    months ended June 30, 2009. We repaid
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$0.7 million in principal on our term loan during the year
    ended December 31, 2008. We did not repay any principal on
    our term loan in 2007. See "— Overview"
    above and "— Credit Facility" below.
Our primary sources of liquidity are our cash and cash
    equivalent balances as well as availability under our revolving
    credit facility. At December 31, 2008, we had cash and cash
    equivalents of $13.1 million and $10.0 million of
    availability under our revolving credit facility. Our total
    indebtedness was $69.3 million at December 31, 2008.
    At June 30, 2009, our principal sources of liquidity were
    cash and cash equivalents of $15.9 million and
    $10.0 million of availability under our revolving credit
    facility. Our total indebtedness was $68.4 million at
    June 30, 2009. We believe that our consistent cash flow and
    our $10.0 million availability combined with our low
    capital expenditure costs will provide us with sufficient
    capital to continue to grow our business, but we will use a
    significant portion of our cash flow to pay interest on our
    outstanding debt, limiting the amount available for working
    capital, capital expenditures and other general corporate
    purposes. As we continue to expand our business, we may in the
    future require additional working capital for increased costs.
Long-term
    Liquidity
At December 31, 2008, we had cash and cash equivalents of
    $13.1 million and $10.0 million of availability under
    our revolving credit facility, and at June 30, 2009, we had
    cash and cash equivalents of $15.9 million and
    $10.0 million of availability under our revolving credit
    facility. We anticipate that the funds generated by our
    operations, as well as funds available under our revolving
    credit facility, as well as the net proceeds that we receive
    from this offering, will be sufficient to meet working capital
    requirements and to finance capital expenditures over the next
    several years. There can be no assurance, however, that
    sufficient cash resources will be available to us in an amount
    sufficient to enable us to service our indebtedness or to fund
    our other liquidity needs. Our ability to meet our debt service
    obligations and other capital requirements, including capital
    expenditures and acquisitions, will depend upon our future
    results of operations and our ability to obtain additional debt
    or equity capital and our ability to stay in compliance with our
    financial covenants, which, in turn, will be subject to general
    economic, financial, business, competitive, legislative,
    regulatory and other conditions, many of which are beyond our
    control. We may also need to obtain additional funds to finance
    acquisitions, which may be in the form of additional debt or
    equity. Although we believe we have sufficient liquidity under
    our revolving credit facility, as discussed above, under extreme
    market conditions there can be no assurance that such funds
    would be available or sufficient, and in such a case, we may not
    be able to successfully obtain additional financing on favorable
    terms, or at all.
Cash
    Flow
Cash Flow
    from Operating Activities
Net cash provided by operating activities was $4.8 million
    during the six months ended June 30, 2009 compared to
    $2.8 million during the six months ended June 30,
    2008. This $2.0 million increase was primarily due to an
    increase in net income of $4.1 million offset by a decrease
    in cash flows from working capital of $2.3 million. The
    decrease in working capital was primarily the result of a change
    in deferred revenues.
Net cash provided by operating activities was $13.6 million
    for 2008 compared to $12.7 million in 2007. The
    $0.9 million increase was primarily due to changes in
    non-cash adjustments totaling $1.7 million and working
    capital improvements of $1.0 million partially offset by a
    decrease in net income of $1.9 million, The working capital
    improvements were primarily the result of a $2.2 million
    increase in deferred revenue, offset by a $1.3 million
    decrease in accrued liabilities.
Net cash provided by operating activities was $12.7 million
    for 2007 compared with $7.5 million in 2006. The
    $5.2 million increase was primarily due to changes in
    non-cash adjustments totaling $2.5 million and working
    capital improvements of $3.5 million partially offset by a
    decrease in net income of $0.7 million. The increase in
    working capital was primarily due to an increase in deferred
    revenue of $3.2 million, an increase in accrued liabilities
    of $1.1 million, offset by a decrease in accounts
    receivable of $0.4 million and a decrease in prepaid
    expenses and other expenses of $0.5 million.
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Cash Flow
    from Investing Activities
Net cash used for investing activities for the six months ended
    June 30, 2009 was $0.4 million used for the purchase
    of property and equipment.
Net cash used for investing activities for the year ended
    December 31, 2008 was $11.0 million and included
    $9.7 million in net cash used for the purchase of
    TeacherWeb and $1.3 million used for the purchase of
    property and equipment.
Net cash used for investing activities in 2007 was
    $85.3 million and included $84.8 million net cash used
    for the purchase of Study Island, LP in connection with the
    Providence Equity Transactions and $0.5 million used for
    the purchase of property and equipment.
Net cash used for investing activities in 2006 was
    $0.2 million and included the purchase of property and
    equipment.
Cash Flow
    from Financing Activities
Net cash used for financing activities in the six months ended
    June 30, 2009 was $1.6 million due to
    $0.9 million in principal payments on our term loan and
    $0.8 million in tax distributions paid to our members.
Net cash used for financing activities was $0.5 million for
    2008 and was primarily due to $10.0 million of payments on
    our revolving credit facility and $0.7 million of payments
    on our term loan, offset in part by the receipt of
    $10.0 million in proceeds from our revolving credit
    facility and $0.2 million in refunds for debt financing
    costs incurred in the year ended December 31, 2007 in
    connection with the Providence Equity Transactions.
Net cash provided by financing activities for 2007 was
    $82.2 million and was primarily due to the receipt of
    $89.5 million in proceeds from the issuance of equity and
    the receipt of $70.0 million in proceeds from the
    incurrence of debt under our term loan in connection with the
    Providence Equity Transactions. These proceeds were offset in
    part by $74.8 million in distributions to our
    equityholders, $1.7 million in debt financing costs and
    $0.8 million in cash distributions to the predecessor
    owners.
Net cash used for financing activities was $6.4 million for
    2006 due to the $6.4 million of cash distributions made to
    the predecessor owners.
Archipelago Learning Holdings, LLC has authorized an
    $8.0 million special distribution in the third quarter of
    2009. In addition, Archipelago Learning Holdings, LLC intends to
    make additional distributions of approximately $1.4 million
    to its equity holders to enable them to meet their estimated tax
    obligations for the period from January 1, 2009 to the date
    of the Corporate Reorganization. The amount of these
    distributions will be based on Archipelago Learning Holdings,
    LLC's estimated net taxable income from January 1,
    2009 to the date of the Corporate Reorganization.
Credit
    Facility
In November 2007, as part of the Providence Equity Transactions,
    we entered into an $80.0 million credit facility with
    General Electric Capital Corporation, as agent, composed of a
    $70.0 million term loan and a $10.0 million revolving
    credit facility commitment of $10.0 million, which expires
    in November 2013. The proceeds of the term loan and
    $4.9 million in cash were used to pay a distribution of
    $73.2 million to the Class A shareholders and debt
    financing costs of $1.7 million. The term loan bears
    interest at rates based upon either a base rate or LIBOR rate
    plus an applicable margin (3.25% as of June 30, 2009, 3.25%
    as of December 31, 2008, and 4.00% as of December 31,
    2007, respectively, in each case for a LIBOR-based term loan)
    determined based on our leverage ratio. Amounts under the
    revolving credit facility can be borrowed and repaid, from time
    to time, at our option, subject to the pro forma compliance with
    certain financial covenants. In 2008, we received a refund of a
    portion of our debt financing costs in the amount of
    $0.2 million.
In May 2009 the credit agreement governing the term loan and the
    revolving credit facility was amended to permit the creation of
    AL Midco, LLC, or AL Midco, a new wholly owned subsidiary of
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Archipelago Learning Holdings, LLC, which assumed all of
    Archipelago Learning Holdings, LLC's interests in
    Archipelago Learning, LLC. AL Midco, became a guarantor under
    the credit agreement and Archipelago Learning Holdings, LLC was
    released as guarantor.
The obligations under the credit facility are guaranteed by AL
    Midco and TeacherWeb. The credit facility is secured on a
    first-priority basis by security interests (subject to permitted
    liens) in substantially all tangible and intangible assets,
    subject to certain exceptions, owned by Archipelago Learning,
    LLC, AL Midco and TeacherWeb, including pledges of the voting
    stock of the subsidiaries of Archipelago Learning, LLC,
    AL Midco and TeacherWeb. In addition, any future domestic
    subsidiaries of Archipelago Learning, LLC, AL Midco and
    TeacherWeb will be required (subject to certain exceptions) to
    guarantee the credit facility and grant liens on substantially
    all of its assets to secure such guarantee.
Our credit facility requires us to maintain certain financial
    ratios, including a leverage ratio (based on the ratio of
    consolidated indebtedness, net of cash and cash equivalents
    subject to control agreements, to consolidated EBITDA, defined
    in the credit facility as earnings before interest, taxes,
    depreciation, derivative losses, changes in deferred revenue,
    stock based compensation, certain investments and permitted
    acquisition expenses, certain permitted payments to Providence
    Equity Partners, unusual non-recurring charges, certain agency
    fees to the administrative agent and adjustments related to the
    acquisition of TeacherWeb, or Adjusted EBITDA), an interest
    coverage ratio (based on the ratio of Adjusted EBITDA to
    consolidated interest expense, as defined in the credit
    facility) and a fixed charge coverage ratio (based on the ratio
    of Adjusted EBITDA to fixed charges, as defined in the credit
    facility). Based on the formulations set forth in the credit
    facility, as of June 30, 2009, we were required to maintain
    a maximum leverage ratio of 4.50 to 1.00, a minimum interest
    coverage ratio of 2.10 to 1.00 and a minimum fixed charge
    coverage ratio of 1.40 to 1.00. As of June 30, 2009, our
    leverage ratio was 2.61 to 1.00, our interest coverage ratio was
    5.45 to 1.00 and our fixed charge coverage ratio was 3.65 to
    1.00. The financial ratios we are required to maintain become
    more restrictive over time.
Our credit facility also contains certain affirmative and
    restrictive covenants that, among other things, provide
    limitations on the incurrence of additional indebtedness, liens
    on property, sale and leaseback transactions, investments, loans
    and advances, merger or consolidation, asset sales,
    acquisitions, dividends, transactions with affiliates,
    prepayments of any other indebtedness, modifications of our
    organizational documents and restrictions on our subsidiaries.
    The credit facility contains events of default that are
    customary for similar facilities and transactions, including a
    cross-default provision with respect to any other indebtedness
    and an event of default that would be triggered by a change of
    control, as defined in the credit facility, and which is not
    expected to be triggered by this offering. As of June 30,
    2009, December 31, 2008 and 2007, we were in compliance
    with all covenants.
We have the right to optionally prepay our borrowings under the
    term loan or the revolving credit facility, subject to the
    procedures set forth in the credit facility. We may be required
    to make prepayments on our borrowings under the term loan or the
    revolving credit facility if we receive proceeds as a result of
    certain asset sales, debt issuances, events of loss or if we
    have excess cash flow (as defined in the credit facility).
As of June 30, 2009, $68.4 million of borrowings were
    outstanding under the term loan and $0 was outstanding under the
    revolving credit facility. As of December 31, 2008,
    $69.3 million of borrowings were outstanding under the term
    loan and $0 was outstanding under the revolving credit facility.
    For the six months ended June 30, 2009 and for year ended
    December 31, 2008, the weighted average interest rate under
    the term loan was 3.76% and 7.03%, respectively, before giving
    effect to the interest rate swap. The rate on our interest rate
    swap is the difference between our fixed rate of 4.035% and the
    floating rate of three-month LIBOR.
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Contractual
    Obligations
As of December 31, 2008, our contractual obligations and
    other commitments were as follows:
Payments due by period
Total
Less than 1 year
1-3 years
3-5 years
More than 5 years
(In thousands)
Long-term debt obligations(1)
$
69,300
$
700
$
2,100
$
66,500
—
Operating lease obligations
$
1,467
$
462
$
1,005
—
—
(1)
Interest payments based on variable interest rates on our
    long-term debt obligations are excluded from our contractual
    obligations.
Off-Balance
    Sheet Arrangements
We do not have any off-balance sheet arrangements.
Qualitative
    and Quantitative Disclosures about Market Risk
Interest
    Rate Risk
We are exposed to interest rate risk in connection with our term
    loan and any borrowings under our revolving credit facility.
    Amounts borrowed under our term loan and our revolving credit
    facility bear interest at rates based upon a base rate or LIBOR,
    plus an applicable margin. To manage our interest rate exposure,
    and as a requirement under our term loan, we entered into an
    interest rate swap agreement with a notional amount totaling
    $45.5 million, of which $40.5 million remained in
    effect as of June 30, 2009. The notional amount of the
    interest rate swap will decrease in periodic amounts to a
    notional amount of $30.5 million at the December 2010
    termination date. We swapped a floating rate payment based on
    three month LIBOR for a fixed rate of 4.035% in order to
    minimize the variability in expected future cash flow due to
    interest rate movements on our LIBOR-based variable rate debt.
    Based on the amount outstanding under our term loan at
    June 30, 2009, we believe that a 1% increase in the
    applicable interest rate, before giving effect to the interest
    rate swap, would cause an increase in our interest expense of
    approximately $0.7 million on an annual basis. Because the
    short-term LIBOR, which we use to determine our term loan
    interest rate, is less than 1%, it cannot decrease by 1%, and
    any decrease would result in a decrease in our interest expense.
    For further information on our interest rate swap agreement, see
    "— Components of Service Revenue and
    Expense — Other Income (Expense)" above and
    note 2 to our audited consolidated financial statements
    included elsewhere in this prospectus.
In addition, our interest income is sensitive to changes in the
    general level of U.S. interest rates. We had unrestricted
    cash and cash equivalents of $15.9 million and
    $13.1 million as of June 30, 2009 and
    December 31, 2008, respectively. Our unrestricted cash and
    cash equivalents are maintained primarily in short term,
    treasury-backed accounts.
Effects
    of Inflation
We believe that inflation has not had a material impact on our
    results of operations in the periods presented. We cannot assure
    you that future inflation will not affect our operating expense
    in future periods.
Recently
    Issued Accounting Standards
In December 2007, the FASB issued FASB Statement
    No. 141(R),
Business Combinations,
which establishes
    principles and requirements for how an acquirer recognizes and
    measures in its financial statements the identifiable assets
    acquired, the liabilities assumed, non-controlling interest in
    the acquire, and the goodwill acquired. FASB Statement
    No. 141(R) also establishes disclosure requirements to
    enable the evaluation of the nature and financial effects of the
    business combination FASB Statement No. 141(R) is effective
    for financial statements issued for fiscal years beginning after
    December 15, 2008, and early adoption
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is prohibited. The implementation of this standard did not have
    a material effect on our financial condition or results of
    operations. We will assess the impact of this standard when and
    if future acquisitions occur.
In February 2008, the FASB issued FASB Staff Position
    ("FSP")
FAS No. 157-2,
Effective Date for FASB Statement No. 157
. This FSP
    permitted the delayed application of SFAS 157 for all
    nonrecurring fair value measurements of nonfinancial assets and
    nonfinancial liabilities until fiscal years beginning after
    November 15, 2008. We adopted this portion of the statement
    on February 1, 2009, and the adoption did not have a
    material impact on our consolidated financial statements.
In March 2008, the FASB issued FASB Statement No. 161,
Disclosures about Derivative Instruments and Hedging
    Activities — an amendment of FASB Statement 133
.
    FASB Statement No. 161 requires enhanced disclosures about
    a company's derivative and hedging activities. These
    enhanced disclosures will discuss (a) how and why a company
    uses derivative instruments, (b) how derivative instruments
    and related hedged items are accounted for under FASB Statement
    No. 133 and its related interpretations, and (c) how
    derivative instruments and related hedged items affect a
    company's financial position, results of operations, and
    cash flows. FASB Statement No. 161 is effective for fiscal
    years beginning on or after November 15, 2008, with earlier
    adoption allowed. The implementation of this standard did not
    have a material effect on our consolidated financial condition
    or results of operations for interim periods beginning
    January 1, 2009.
In April 2008, the FASB issued FSP FASB
No. 142-3,
Determination of the Useful Life of Intangible Assets
.
    FSP FASB
No. 142-3
amends the factors that should be considered in developing
    renewal or extension assumptions used to determine the useful
    life of a recognized intangible asset under FASB Statement
    No. 142. FSP FASB
No. 142-3
is effective for fiscal years beginning after December 15,
    2008. The implementation of this standard did not have a
    material effect on the our consolidated financial condition or
    results of operations.
In April 2009, the FASB issued FSP
No. FAS 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial Instruments
("FSP
FAS 107-1
and APB
28-1").
This FSP amends SFAS No. 107,
Disclosures about
    Fair Value of Financial Instruments
, to require disclosures
    about fair value of financial instruments in interim as well as
    in annual financial statements. This FSP also amends Accounting
    Principles Board ("APB") Opinion No. 28,
Interim Financial Reporting
, to require those disclosures
    in all interim financial statements. FSP
FAS 107-1
and APB
28-1
were effective for interim and annual periods ending after
    June 15, 2009. We adopted these provisions on
    August 1, 2009, which resulted in a new disclosure in our
    consolidated financial statements (see note 3 to the
    consolidated financial statements included elsewhere in this
    prospectus).
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events
("SFAS 165"). This
    statement provides general standards for the accounting and
    reporting of subsequent events that occur between the balance
    sheet date and issuance of financial statements. The statement
    requires the issuer to recognize the effects, if material, of
    subsequent events in the financial statements if the subsequent
    event provides additional evidence about conditions that existed
    as of the balance sheet date. The issuer must also disclose the
    date through which subsequent events have been evaluated and the
    nature of any nonrecognized subsequent events. Nonrecognized
    subsequent events include events that provide evidence about
    conditions that did not exist as of the balance sheet date, but
    which are of such a nature that they must be disclosed to keep
    the financial statements from being misleading. The statement is
    effective for interim and annual periods ending after
    June 15, 2009. We have considered subsequent events through
    September 2, 2009, related to our consolidated financial
    statements included elsewhere in the registration statement of
    which this prospectus is a part.
In June 2009, the FASB issues FASB Statement No. 168,
The "FASB Accounting Standards Codification" and
    the Hierarchy of Generally Accepted Accounting
    Principles — a Replacement of FASB Statement
    No. 162
. FASB Statement 168 provides for the FASB
    Accounting Standards Codification (the "Codification")
    to become the single official source of authoritative,
    nongovernmental U.S. GAAP. The Codification did not change
    GAAP but reorganizes the literature. FASB Statement 168 is
    effective for interim and annual periods ending after
    September 15, 2009. We will begin to use the Codification
    when referring to GAAP in our financial statements for the third
    quarter of 2009. This will not have an impact on our financial
    position, results of operations of cash flows.
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INDUSTRY
    AND MARKET DATA
This prospectus includes industry and market data that we
    obtained from periodic industry publications, third-party
    studies and surveys, filings of public companies in our industry
    and internal company surveys. These sources include the National
    Center for Education Statistics, the World Economic Forum, the
    Nielsen Company, Outsell, Inc., U.S. Bureau of Labor
    Statistics, Consortium for School Networking and Market Data
    Retrieval. Industry publications and surveys generally state
    that the information contained therein has been obtained from
    sources believed to be reliable. Although we believe the
    industry and market data to be reliable as of the date of this
    prospectus, this information could prove inaccurate. Industry
    and market data could be wrong because of the method by which
    sources obtained their data and because information cannot
    always be verified with complete certainty due to the limits on
    the availability and reliability of raw data, the voluntary
    nature of the data gathering process and other limitations and
    uncertainties. In addition, we do not know all of the
    assumptions regarding general economic conditions or growth that
    were used in preparing the forecasts from sources cited herein.
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BUSINESS
Our
    Company
Archipelago Learning is a leading subscription-based online
    education company. We provide standards-based instruction,
    practice, assessments and productivity tools that improve the
    performance of educators and students via proprietary web-based
    platforms. Study Island, our core product line, helps students
    in Kindergarten through 12th grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the
2008-2009
school year, Study Island products were utilized by
    approximately 8.3 million students in over 19,200 schools
    in 50 states who answered over 2.8 billion of our
    practice questions. We recently began offering classroom and
    school website portals, digital lockers and teacher productivity
    tools through our TeacherWeb services and online postsecondary
    programs through our Northstar Learning product line.
We capitalize on two significant trends in the education market:
    (1) an increased focus on higher academic standards and
    educator accountability for student achievement, which has led
    to periodic assessment in the classroom to gauge student
    learning and inform instruction, also known as formative
    assessment, and (2) the increased availability and
    utilization of web-based technologies to enhance and supplement
    teacher instruction, engage today's technology-savvy
    learners and improve student outcomes.
Despite spending an estimated $630 billion in the
2007-2008
school year on K-12 education — more than any other
    developed country — the United States ranks
    25th in the world in the quality of its primary education
    system, according to the World Economic Forum. In response to
    this gap, policymakers and parents are paying greater attention
    to the effectiveness of U.S. public schools, demanding
    higher educational standards and accountability from teachers,
    administrators and school districts. In addition, increased
    usage and acceptance of online technology is changing how
    educational content, such as lessons, homework and assessments,
    is delivered and utilized. These new educational tools and
    technologies help improve the learning experience of students by
    augmenting the teaching techniques of skilled teachers and
    supporting and strengthening the skills of inexperienced or less
    effective instructors. An estimated $11.5 billion was spent
    on the K-12 instructional materials market in 2008, according to
    Outsell. In 2009, Outsell projects that spending on
    instructional content will grow by about 2-4%, and spending on
    assessment, tutoring and test preparation services will grow by
    about 4.8-5.2%. Between 2010 and 2012 the overall market is
    expected to grow at an annual compounded growth rate of 5.5%
    according to Outsell.
Our Study Island products are designed to improve educational
    results and meet accountability criteria, leveraging the
    widespread adoption of online technologies. Study Island
    combines rigorous content that is highly customized to specific
    standards in reading, math, science and social studies with
    interactive features that reinforce and reward student
    accomplishments. We believe faculty and school administrators
    purchase Study Island because it is an innovative, low-cost and
    high-impact solution for enhancing teacher effectiveness,
    promoting student learning of core subject concepts and skills
    and preparing students for state standardized tests. By enabling
    teachers to track student performance in real-time, Study Island
    facilitates differentiated instruction to address learning gaps
    for individual students, while allowing administrators to
    monitor student progress and measure teacher effectiveness.
    Study Island was recognized as one of the top
    100 educational products for the
2008-2009
school year by District Administration magazine's
    reader's choice survey.
Our flexible web-based distribution model and in-house content
    development capabilities allow us to continually update and
    improve our products, distribute our products in a
    cost-efficient manner, and price our products affordably. Over
    the last nine years we have created a digital library of
    approximately 306,000 proprietary questions and explanations, a
    simple but elegant content management system and HTML authoring
    system, and a built-in ability to dynamically generate
    additional questions.
We have significantly grown the number of students and schools
    served by our products since our inception in 2000. From 2000 to
    2006, we concentrated our efforts on developing our Study Island
    products, increasing from 27 products to 429 products during
    that period. In 2007, we began focusing on managing our growth
    and operations more efficiently, particularly with the hiring of
    our current management team. In
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addition, we have developed a sophisticated sales and marketing
    force that has been successful in growing our sales and customer
    base. We increased the number of school customers and registered
    student users of our Study Island products, from approximately
    7,800 and 3.0 million, respectively, in 2006, to over
    19,200 and 8.3 million, respectively, in June 2009.
In addition to our Study Island product line, our recently
    acquired TeacherWeb business, which helps teachers and schools
    create website portals to improve teacher productivity and
    school-to-home communications, provides another area for growth
    as teaching environments continue to modernize. We also intend
    to utilize our content development and assessment expertise to
    target various instruction, assessment and exam preparation
    areas within the postsecondary education market through our
    Northstar Learning product line, which provides instruction,
    practice, assessment and test preparation for targeted high
    enrollment postsecondary course areas.
Our
    Markets
The U.S. educational system, consisting of K-12 and
    postsecondary education, collectively includes approximately
    74 million students and approximately $1 trillion in
    educational expenditures according to NCES.
The
    K-12 Education Market
The U.S. K-12 education market consists of approximately
    54 million students in more than 112,600 schools, according
    to MDR. The U.S. K-12 school system has over 90,600 public
    schools in over 15,200 school districts and county and regional
    centers and more than 22,000 private and Catholic schools,
    according to MDR.
Key
    Dynamics in the K-12 Education Market
A number of key dynamics have impacted the K-12 education market
    in recent years:
Increased Accountability.
Despite spending an
    estimated $630 billion during the
2007-2008
school year on K-12 education — more than any other
    developed country — the United States ranks
    25th in the world in the quality of its primary education
    system, according to a
2008-2009
report by the World Economic Forum, which describes this as a
    "competitive disadvantage." American students are
    slipping further behind their foreign peers in international
    assessments, and fewer are showing an interest in the science,
    technology, engineering and math fields that are vital to
    innovation and entrepreneurial vigor. Within the United States,
    there exists a growing disparity in the academic performance of
    students in public schools in affluent communities compared to
    that of students in poorer neighborhoods. As a result,
    policymakers and parents have paid greater attention to the
    effectiveness of U.S. public schools, demanding higher
    educational standards and accountability from teachers,
    administrators and school districts. States publish
    accountability reports that show each school's progress and
    ability to meet proficiency standards, and these results are
    often reported by local press outlets. This increased visibility
    into school performance has led to increased parent and
    policymaker pressure on schools and teachers, including at the
    presidential level. President Obama's administration has
    launched the $4.35 billion "Race to the Top" fund
    to highlight and replicate innovative education strategies as
    part of the administration's highly publicized efforts to
    reform education.
Legislative Developments.
In 2001, Congress
    passed the reauthorization of the Elementary and Secondary
    Education Act, commonly referred to as No Child Left Behind, or
    NCLB. NCLB requires states receiving federal funding for
    education to establish high, state-wide, academic standards in
    reading, mathematics and science for students in grades 3
    through 8 and in high school and to assess students'
    proficiency in meeting these standards annually. NCLB requires
    states to set incremental milestones for all students to show
    yearly proficiency improvements, with the goal that all students
    perform at grade-level proficiency by 2014. As states
    implemented new, higher academic standards and assessments in
    response to NCLB, it became clear that after the first two years
    of implementation, many schools, particularly those in large,
    urban, poorer communities were not meeting NCLB's Adequate
    Yearly Progress, or AYP, milestones. As a result, educators
    began exploring instructional tools to help students master
    academic standards and improve
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performance on accountability assessments. This has driven
    demand for standards-based content and both formative and
    summative, or end-of-year, assessment products. The Elementary
    and Secondary Education Act initially was scheduled for
    reauthorization in October 2008, but was extended until October
    2009 in order to allow the new U.S. presidential
    administration to impact the direction of any future
    reauthorization. More recently, in early 2009, Congress passed
    the American Recovery and Reinvestment Act, better known as the
    stimulus act, which provides more than $64 billion of
    federal funds for the Department of Education, with a phased
    roll-out of such funds to states between April 2009 and the
    spring of 2010. In order to receive these education funds,
    states must satisfy certain conditions, which are expected to
    correspond with the basic tenets of NCLB reauthorization. These
    conditions include assurances that states will strive to meet
    more rigorous educational standards, improve underperforming
    schools, lower high school dropout rates and ensure student
    readiness for success in college and in the workforce.
Increased Access to Computers and the
    Internet.
Today's students use computer
    technology in and out of the classroom, and many students have
    access to internet-enabled computers at school and home.
    Increased usage and acceptance of online technology is changing
    how educational content is delivered and utilized by teachers
    and students. According to the Consortium for School Networking,
    98% of rural and wealthy schools have high-speed internet access
    in classrooms, as do 93% of classrooms in poor urban school
    districts. More than 80% of Americans now have a computer in
    their homes and, of those, almost 92% have internet access,
    according to a study on home internet access from The Nielsen
    Company. In addition, NCLB mandates that schools improve
    school-to-home or school-to-parent communication and involvement
    in their child's education. As a result, schools are
    increasingly looking for integrated website portals and
    productivity tools to more easily comply with this mandate, more
    effectively use student achievement data to keep parents
    informed and more readily guide parents' ability to help
    their children improve their skills and proficiency.
The
    Market for Supplemental Learning Materials
Schools use a variety of supplemental materials to augment their
    core curriculum, provide remediation and enrichment and offer
    additional learning opportunities in the classroom and at home.
    These materials include traditional print-based materials, such
    as textbooks, workbooks, problem sheets and printed reading
    materials. With increased availability and use of computers in
    the classroom and at home, vendors have developed software and,
    increasingly, online programs and content as an alternative to
    print-based materials.
An estimated $11.5 billion was spent on the K-12
    instructional materials market in 2008, according to Outsell. In
    2009, Outsell projects that spending on instructional content
    will grow by about 2-4%, and spending on assessment, tutoring
    and test preparation services will grow by about 4.8-5.2%.
    Between 2010 and 2012 the overall market is expected to grow at
    an annual compounded growth rate of 5.5% according to Outsell.
Increased accountability, combined with the need for districts
    and states to meet the requirements of NCLB and other
    legislative developments, has resulted in a significant decrease
    in spending on traditional print-based and software-based
    supplemental materials and a growing market for innovative
    online programs that offer functionality and real-time
    assessment and reporting not provided by traditional solutions.
Limitations of Traditional Print
    Products.
Educators increasingly are recognizing
    the limitations of traditional print-based textbook and workbook
    learning materials, which are static, cannot be quickly
    corrected for errors or updated to address evolving standards,
    cannot provide individualized feedback to students, do not
    provide teachers with a method to quickly track student progress
    and become ragged and obsolete with time and usage. Such
    traditional print-based learning materials are costly and need
    to be replaced on a regular basis due to the publication of
    newer editions or, in the case of workbooks, use by students.
    These materials also do not provide administrators with easily
    obtainable metrics to measure the performance of classes,
    teachers or individual grades in their schools on a regular
    basis.
Limitations of Software Products.
As a result
    of the recognition of the limitations of print-based products
    and the perceived advantages of computer-based materials,
    educators began to utilize software-based supplemental
    materials, such as CD-ROMs. However, these materials also have
    significant limitations.
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Software products are designed to run on specific operating
    systems with specific memory requirements, and require
    installation on individual computers or costly and
    time-consuming installations on centralized computer systems.
    Software products place increased demands on schools'
    limited IT personnel, systems and budgets. Access to these
    products is typically limited to the computers in a specific
    classroom or computer lab and cannot be used at home unless
    schools provide a student with a disk containing the software
    and the student has access to a computer with the appropriate
    operating system or ability to play a CD-ROM. Any updates
    require the publication, receipt, distribution and installation
    of new software or CD-ROMs, which could take months and require
    the school to purchase new versions. In addition, software-based
    products are typically unable to provide real-time feedback
    about student performance to teachers or educators.
Advantages of Online Learning
    Solutions.
Online products can provide educators
    with real-time feedback on student progress, allowing for
    tailored instruction based on individual student or classroom
    needs, and can generate school-wide reports to administrators.
    Online products also are easily, automatically and frequently
    updated with new or more current content, additional features
    and enhancements and provide students with instant feedback,
    positive reinforcement and remediation when proficiency levels
    are not met. Also, unlike software- or CD-ROM-based learning
    materials, web-based products require no software to be
    installed in school or home computers and can be accessed
    anywhere the internet is available. Web-based products can be
    offered at lower prices as they do not require expenditures for
    publishing, paper or electronic media, shipping or warehousing.
Our
    Competitive Strengths
We believe the following are our key competitive strengths:
Customized, Standards-Based Content.
Study
    Island offers online, standards-based instruction, practice and
    assessments for K-12 built from applicable standards in all
    50 states, as well as Washington, DC. We believe this deep
    customization is attractive to educators, providing them with a
    resource that meets their specific state and grade-level
    teaching needs in a variety of subjects. We offer over 1,100
    grade level Study Island products in math, reading/language
    arts, writing, science and social studies. In addition,
    Northstar Learning offers instruction, practice, assessments and
    test preparation for the GED and allied health licensure exams,
    as well as developmental studies in college readiness
    English/language arts and mathematics.
Real-time Student Tracking, Built-in Remediation and
    Enrichment.
We provide real-time reporting on
    student achievement, allowing educators to quickly identify
    learning gaps and provide targeted instruction and practice.
    Study Island also provides students with immediate feedback and
    explanations and, when required, remediation content designed to
    build foundational skills in order to accelerate students to
    grade-level proficiency. In addition, our products provide
    professional development materials that provide best-practice
    techniques for teachers to help students grasp key concepts and
    skills.
Engaging, Fun and Easy to Use for
    Students.
Our products utilize a simple,
    graphical user interface that is intuitive and easy to use. In
    addition, our Study Island products incorporate games and
    rewards in order to make learning fun and engaging for students.
    By engaging students and providing them with the tools they need
    to succeed, we enable them to take control of their own
    learning, boost their confidence and keep them interested in
    using our products, while creating a culture of academic success.
Accessible, Dynamic Web-based Platform.
Our
    products are delivered entirely online so they can be used by
    teachers and students on computers wherever internet access is
    available, such as classrooms, computer labs, media centers,
    school libraries, public libraries or at home. Our programs are
    compatible with existing school and school district enterprise
    systems and require no additional software, no installation or
    maintenance and no extensive implementation or training.
    Moreover, unlike traditional workbooks or software products, our
    Study Island and Northstar Learning content is easily and
    quickly updated whenever content or functionality enhancements
    are introduced or products are modified due to changes in state
    standards. Similarly, TeacherWeb requires no user HTML or other
    technical knowledge and provides an easy way for teachers to
    upload content to classroom and school websites to keep students
    and parents informed.
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High Impact, Low Cost Solution.
Study Island
    offers a comprehensive online educational solution on a hosted
    platform and provides high quality content, assessment and
    reporting for core subjects in a wide range of grade levels.
    This eliminates the need for schools to have multiple vendors or
    systems, thereby simplifying purchasing, training and
    implementation. At an average annual price per student per
    subject of $3.00, or $10.00 per student for all subjects, Study
    Island products are significantly less expensive than competing
    traditional print, software and online alternatives provided by
    large education publishers. TeacherWeb is affordably and
    competitively priced at an average annual cost of $39 per
    teacher/classroom or $935 per school subscription as compared to
    similar applications. Northstar Learning products are priced in
    the $10.00 to $27.00 range and are also substantially less
    expensive than traditional textbook and software products
    currently purchased by students at community colleges, technical
    colleges, proprietary or for-profit colleges.
Management Team with Strong Education Industry
    Expertise.
Members of our senior management team
    have extensive experience in the education industry and in
    serving the academic community. Our Chief Executive Officer Tim
    McEwen, who has approximately 34 years of experience in the
    industry, and our Chief Financial Officer James Walburg, who has
    27 years of public company accounting and finance
    experience, both joined us in 2007. Our Chief Technology Officer
    Ray Lowrey, who has approximately 14 years of experience in
    the education industry, joined us in 2008. Under their
    leadership, our business has grown significantly and the number
    of school customers and registered student users of our Study
    Island products have increased from approximately 7,800 and
    3.0 million, respectively, in 2006, to over 19,200 and
    8.3 million, respectively, in June 2009.
Key
    Attributes of Business Model
We believe the following are the key attributes of our business
    model:
High Revenue Visibility and Strong Cash Flow
    Generation.
We believe we have an attractive
    business model characterized by a visible recurring revenue
    stream and high profit margins. Our subscription-based revenue
    model and high recurring revenue provide strong earnings
    visibility. Our operations are designed to achieve and maintain
    attractive profit margins through our highly scalable 100%
    online delivery platform, low research and development
    requirements and viral marketing strategy. In addition, we
    believe our low capital expenditure requirements and up-front
    subscription payments by customers generate strong cash flow and
    high returns on invested capital.
Scalability and Flexibility.
We continue to
    scale, our business by increasing our product offerings, our
    sales and the number of students, teachers and schools using our
    products without incurring significant incremental expense. Our
    content development processes allow us to quickly and
    inexpensively update or create products and we can easily add
    these new products as well as new users through our single
    online delivery platform. Our flexible sales model incorporates
    in-house web optimization, direct mail and email marketing,
    which allows us to incrementally expand our sales and marketing
    efforts at a relatively low cost. In addition, our centralized,
    online delivery model is more cost-effective for our customers
    relative to traditional licensed and installed software
    solutions and traditional textbook and workbook publishers.
Powerful, Demand-Driven Sales and
    Marketing.
Our Study Island products are often
    introduced into the classroom by principals or teachers, rather
    than mandated by district-level administrators. Approximately
    58% to 78% of surveyed customers of Study Island reported that
    they discovered Study Island through word-of-mouth endorsements
    from other educators, according to annual independent Market
    Measurement surveys of 500 Study Island customers conducted
    since 2006. In addition to this viral demand for our products
    and services, we have a 113 member team of specialized sales and
    marketing professionals who are experienced in generating new
    sales of online educational products. We believe that our focus
    on the classroom and site-level sales results in greater
    customer loyalty, as evidenced by growing revenue from our
    existing customer base. In addition, the price points for our
    Study Island and TeacherWeb products are set at levels that
    typically fall within a school principal's discretionary
    budget or can be funded by individual teachers or through parent
    fundraising efforts. Once teachers and principals in one school
    become dedicated customers, we believe their recommendations
    often lead to additional sales within the school and other
    schools within the district. Over
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time, these site-based customer advocates are instrumental in
    helping us gain access to district administrators and achieve
    district-wide purchases.
Our
    Growth Strategy
Our goal is to be the leading provider of subscription-based
    online education tools across the K-12 and postsecondary
    education markets through the following strategies:
Expand the Number of Schools Using Our Study Island
    Products.
In the
2008-2009
school year, our Study Island products were used in over 19,200
    schools throughout all 50 states and Washington, DC,
    representing approximately 17.1% of the over 90,600 public and
    22,000 private and Catholic K-12 schools in the United States.
    We believe that there is a significant opportunity to expand the
    number of schools that use Study Island. For example, only
    approximately 10% of our service revenue in 2008 was derived
    from sales of our Study Island products to high schools. We
    believe the Obama administration's focus on lowering the
    high school drop-out rate and improving high school graduate
    college and job readiness will drive increased demand for our
    high school products. Accordingly, we believe high schools
    provide us with a significant market opportunity. We also
    continue to expand our sales organization in specific states,
    targeting our direct mail and
e-marketing
efforts to educators in schools that do not use Study Island,
    encouraging a "viral" marketing model through the use
    of customer references and referrals, providing free product
    trials and optimizing the appearance of Study Island in key-word
    searches on leading web search engines. In addition, as we
    deepen our school penetration, we increasingly are focused on
    selling Study Island at the district level.
Increase Revenue per School.
In many schools
    that we serve, we have the opportunity to sell additional core
    grade level and subject area products, as well as new products,
    such as our benchmark assessments and graphic novel reading
    intervention, to teachers who already subscribe to one or more
    of our products. Our inside sales team specifically targets our
    existing customer base to sell add-on products. As we enhance
    our products with new features and functionality that increase
    the value of Study Island to our customers, we believe we will
    be able to price these enhancements accordingly. We also market
    TeacherWeb to our Study Island customer base. In addition, the
    increased complexity of high school subject matter and related
    assessment standards allow us to price high school products
    higher than those for the elementary and middle school markets,
    and high school enrollments are usually larger, resulting in
    higher average revenue from invoiced sales. We intend to
    leverage our domain expertise in instruction, practice and
    assessment to introduce new high school oriented products,
    including reading and math remediation products and core subject
    end of course and exit exam preparation, advanced placement exam
    preparation, PSAT, SAT, ACT and other test preparation, and high
    school courses for credit and credit recovery.
Develop New Products and Enhance our Online
    Platform.
We continually develop new Study Island
    products, as well as new features and functionality for our
    online platform, to address student needs and teacher requests.
    These products also provide additional revenue opportunities.
    For example, we recently introduced state-specific benchmark
    assessment products to enable teachers to predict student
    performance and provide diagnostic information to guide
    instruction, as well as a graphic novel reading intervention
    product that is designed to remediate students who are
    significantly below grade-level reading expectations. We plan to
    introduce a new version of our Study Island online platform in
    January 2010, which will include a custom assessment builder,
    lesson plans and lessons, video content, special needs support
    (including expanded text-to-speech functionality), a writing
    utility, digital locker, new and more sophisticated games, and
    embedded professional development for teachers. We also released
    a major product upgrade for TeacherWeb in March 2009 which
    included an updated look, a library of attractive classroom and
    school web designs and enhanced functionality.
Expand Into New Related Markets.
We believe
    there is a significant opportunity to sell our products and
    services in the postsecondary market and in new geographic and
    end markets.
•
Launched in 2009, Northstar Learning targets the postsecondary
    market utilizing our content development, instruction, exam
    preparation and assessment expertise. Currently, Northstar
    Learning has products in developmental studies for the
    approximately $2.5 billion college remedial studies market
    and in vocational education and licensure exam preparation in
    the
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healthcare occupational field. Our Northstar Learning products
    also include GED exam preparation products, and we are planning
    to introduce new PRAXIS teacher certification preparation
    products in the fourth quarter of 2009 and in 2010. We intend to
    develop additional Northstar Learning products to address other
    technical career certification exams. We plan to expand our
    marketing efforts to increase awareness of the Northstar
    Learning brand and products.
•
We are planning to introduce our Study Island products in the
    three largest English-speaking Canadian provinces in fourth
    quarter of 2009. We believe other English-speaking countries,
    including the United Kingdom, Australia, New Zealand and South
    Africa, also provide potential near-term growth opportunities,
    and we intend to develop products for these markets. In
    addition, we are exploring the opportunities to sell Study
    Island products directly to parents as well as expanding our
    sales efforts to public libraries, school libraries and
    homeschool settings.
Pursue Acquisitions and Strategic
    Relationships.
Since 2007, we have sought
    acquisitions and strategic alliances that expand our product and
    service offerings and provide additional revenue opportunities,
    such as our recent acquisition of TeacherWeb. We intend to
    continue to pursue acquisitions that have products, services and
    businesses that are compatible with our Archipelago Learning
    brand identity, culture and corporate mission. We expect that
    our acquisition activity will be focused primarily on web-based
    products and services for our target markets. In addition, we
    believe our large student audience of over 8 million K-12
    students provides a significant and valuable opportunity to
    enter into strategic relationships in order to cross-sell other
    appropriate, teacher- and parent-approved products to our
    students.
Our
    Products and Services
Archipelago Learning is a leading subscription-based online
    education company. Our products provide standards-based
    instruction, practice, assessments and productivity tools that
    improve the performance of educators and students via
    proprietary web-based platforms.
Core
    Educational Principles
We believe that one of the keys to our success lies in our core
    educational principles that guide product design and development:
•
Clear expectations.
Each Study Island and
    Northstar Learning session focuses on an academic standard or
    underlying topic and sets forth a clear goal for the student to
    master the targeted skill or concept.
•
High quality, rigorous content.
We have
    internal subject area writer and editor expertise and deep
    knowledge of each set of specific standards for which we offer
    products. We build content from the
ground-up,
customized to each set of standards for a particular subject. We
    utilize a scaffolding approach to content development that
    begins with skill building and then builds to higher level
    thinking skills. This "building block" learning
    approach ensures that students master grade level content and
    are prepared for state assessments.
•
Fun and engaging assignments.
Study Island
    sessions are embedded with short games segments and reward
    student mastery of standards with achievement certificates.
    These features provide continual positive reinforcement and
    reward learning to engage students and build student confidence.
•
Immediate feedback.
Students receive immediate
    feedback and explanations for each question, allowing them to
    learn and quickly apply new knowledge to subsequent questions
    and to build skills and conceptual understanding in order to
    handle more complex content that follows.
•
Student responsibility for learning.
Study
    Island automatically offers explanations and prescribes remedial
    or "building block" topics when a student does not
    master a standard or sub-topic, allowing the student to quickly
    address any learning weakness. The student can continue with
    these remediation topics until he or she gradually accelerates
    back to grade level proficiency, receiving built-in rewards for
    learning along the way.
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Study
    Island
Study Island offers subscription-based online products that
    provide standards-based instruction, practice, assessment and
    productivity tools for teachers and students. Each of Study
    Island's products is specifically built from the
    requirements for a subject area in a grade level in a particular
    state. We offer products for math, reading, language arts,
    writing, science and social studies. Our in-house content
    development team creates between five and ten new subject and
    grade level product offerings a month, and we offer specialty
    products based on national standards in subject areas such as
    technological literacy, health and fine arts. Customers may
    subscribe to any number of products to best suit their
    individual classroom or school needs. Subscriptions are
    typically for one year, although we do sell some multi-year
    subscriptions as well. In the case of certain sales, a limited
    number of additional months may be offered as a promotional
    incentive.
Students can log in to Study Island from any computer with
    internet access. Typically, teachers assign topics based on the
    specific standards or topics that were covered in class during a
    particular week. In some schools, students are permitted to take
    control and move through the Study Island program independently,
    earning awards as each standard is mastered. Once logged in,
    students can select to move through the content in a
    traditional, multiple choice test mode or game mode, which
    includes short game segments to reward student achievement. Each
    topic contains a mini-lesson that can be reviewed by the student
    prior to beginning the session. Teachers can customize sessions
    for the number of questions asked as well as the number of
    correct answers needed to reach proficiency in a standard or
    sub-topic. The questions are dynamically generated and therefore
    constantly changing, compelling students to learn concepts
    rather than memorize answers. Students who master a topic
    receive a "Blue Ribbon Achievement Award," which is
    denoted by an icon of a blue ribbon beside the topic as well as
    a printable certificate. Upon answering a question incorrectly,
    students are shown the correct answer along with a detailed
    explanation of this response. When students are having
    difficulty answering questions correctly for a particular
    standard or sub-topic and require additional help to reach
    proficiency, Study Island automatically moves them down to
    appropriate "building block" or remedial topics, where
    students can earn "White Ribbon Achievement Awards" as
    they gradually accelerate back to grade level proficiency and
    ultimately earn the "Blue Ribbon Achievement Award."
Study Island has also linked its program to popular classroom
    response hand-held devices, or clickers, which are manufactured
    and sold by other companies and enable Study Island sessions to
    be conducted in the classroom. The teacher typically teaches a
    particular standard or sub-topic and then projects Study Island
    questions on a whiteboard or a projection screen, and students
    answer using their handheld clickers. The teacher immediately
    receives results on his or her computer to determine whether the
    class is comprehending the material or whether additional
    instruction is required. This classroom methodology enables
    teachers to ensure — as opposed to assume —
    that learning has effectively occurred.
Study Island offers add-on features and programs, such as a
    benchmark assessment that enables educators to predict student
    performance on the end-of-year state assessment and provides
    diagnostic information to guide instruction. In addition, our
    graphic novel reading intervention product is designed to
    remediate students who are behind in grade level reading. We
    regularly release new product enhancements to increase the value
    of Study Island's core standard specific learning programs.
    We plan to introduce a new version of our Study Island online
    platform in January 2010, which will include new features and
    functionality most desired by our existing customer base and
    prospects, including a custom assessment builder,
    standards-based lesson plans and lessons, video content, special
    needs support (including expanded text-to-speech functionality),
    a writing utility, new and more sophisticated games, and
    embedded professional development for teachers. In addition, we
    intend to introduce new high school oriented products, including
    reading and math remediation products, end of course and exit
    exam preparation, advanced placement exam preparation, PSAT,
    SAT, ACT and other norm-referenced test preparation, and high
    school courses for credit and credit recovery.
We intend to expand Study Island's market by releasing its
    first international products in the fourth quarter of 2009 for
    three Canadian provinces: Ontario, Alberta and British Columbia.
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TeacherWeb
TeacherWeb, which we acquired in June 2008, is a website portal
    and productivity tool for educators in the K-12 market, which
    enables teachers and schools to easily and affordably create and
    maintain functional, professional-looking websites. TeacherWeb
    was designed to enable teachers and administrators to quickly
    and easily communicate information to students and parents
    through these websites.
TeacherWeb's key features and functions include:
•
easy access from any internet-connected computer to both view
    and update the site;
•
pre-created, customizable templates that do not require any HTML
    knowledge;
•
a platform for teachers to assign homework, online quizzes and
    structured web-based learning activities called
    "WebQuests";
•
daily productivity and communication tools such as grade books,
    calendars, teacher blogs, supply/wish lists, photo galleries,
    extracurricular events, announcements, cafeteria menus and bus
    schedules;
•
digital locker, a safe and secure online storage solution for
    students and teachers;
•
optional password protection on sensitive page content, such as
    photos and blogs;
•
ability to upload Microsoft Word, Excel, Powerpoint or Adobe pdf
    files;
•
automated
sign-up
for
    trials, payment and account management; and
•
unlimited, free customer support.
Our TeacherWeb application is also substantially less expensive
    than competing programs, averaging $39 per year for a
    teacher/classroom subscription and $500 per year for a school
    subscription, making it an easy purchase using discretionary
    funds. We market TeacherWeb as a standalone product and also
    package it with sales of Study Island.
Northstar
    Learning
In recognition of the significant postsecondary education market
    opportunity, we developed our Northstar Learning product line,
    which was initially launched in April 2009. Northstar Learning
    uses the same proprietary web platform as Study Island, to
    provide instruction, practice, assessment and test preparation
    for targeted high enrollment postsecondary course areas. The key
    features and product functions of Northstar Learning are
    substantially similar to those of Study Island.
We currently offer Northstar Learning products for GED exam
    preparation, developmental studies in college readiness
    English/language arts and mathematics and allied health, and we
    are planning to launch PRAXIS teacher certification products.
•
GED exam preparation.
Northstar Learning
    offers products for each of the five GED testing modules covered
    in the GED exam, which grants a diploma to adults that do not
    have a high school diploma. These modules are reading, writing,
    math, social studies and science.
•
Developmental Studies.
Northstar Learning
    offers developmental English/language arts and math programs for
    the approximately 42% of community college freshmen and 20% of
    four-year college freshmen who are required to raise their
    proficiency levels before colleges and universities allow them
    to enroll in credit-bearing courses.
•
Allied Health programs.
We recently launched
    six allied health products to help students in these certificate
    and Associate Degree allied health programs master the required
    content and pass the applicable health career licensure exams.
    We intend to launch six additional products in late 2009.
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•
PRAXIS teacher
    certification.
Northstar Learning plans to
    publish products in late 2009 and early 2010 to assist educators
    to prepare for and pass the PRAXIS series assessments developed
    by the Educational Testing Service and used by states as part of
    their teacher licensure and certification processes.
We intend to develop additional Northstar Learning products to
    address other vocational-technical career programs that require
    certification exams and online study guides for more difficult
    college and university courses. We also intend to expand our
    marketing and sales efforts to increase awareness of the
    Northstar Learning brand and products, and replicate our K-12
    sales efforts and word-of-mouth viral marketing in the
    postsecondary market.
Northstar
    Market Opportunity
We developed Northstar Learning to capitalize on the
    U.S. postsecondary education market, which is significant.
    NCES estimates that approximately 18.2 million students
    were enrolled in degree-granting postsecondary institutions
    during the
2007-2008
school year. In 2006, approximately 39 million adults in
    the United States in the
18-64
age
    group did not have a high school diploma, but only about 1.5% of
    them earned a GED. Only about 68% of adults who took at least
    one of the five GED tests passed the test in 2006, 72% passed in
    2007 and 73% passed in 2008. In 2008, 777,000 candidates took at
    least one of the five GED tests versus 714,000 in 2006, a 8.8%
    growth rate.
In addition, U.S. adult education enrollment in adult basic
    education, adult secondary education and English as a second
    language programs was about 2.4 million in the
2006-2007
school year. About 38% of these students were enrolled in basic
    education reading and/or math levels below eighth grade courses,
    16% were enrolled in adult secondary education courses and 46%
    were enrolled in English as a second language courses.
Many of the occupations projected to grow the fastest in the
    economy are concentrated in the health care industry. According
    to a U.S. Bureau of Labor Statistics report, health care
    was the largest U.S. industry in 2006 and health care will
    generate 3 million wage and salary jobs between 2006 and
    2016, more than any other industry. Many of these occupations
    require some form of licensure or certification, but most
    workers have jobs that require less than four years of college
    education, according to the U.S. Bureau of Labor Statistics
    report.
Our
    Customers
Approximately 97% of our service revenue in 2008 came from Study
    Island subscriptions from U.S. public and private schools
    and individual buys. In the
2008-2009
school year, Study Island products were used by approximately
    8.3 million students in over 19,200 schools across
    50 states including Washington, DC. Our principle customers
    are teachers, school principals, curriculum directors,
    Title I and Title III directors, superintendents,
    chief technology officers and other administrators. In 2008, the
    average school invoice price for Study Island was $1,854. In
    addition, no single customer accounted for more than 1.5% of our
    total invoiced sales in 2006, 2007 or 2008.
As of June 30, 2009 TeacherWeb had 110,250 customers across
    14,700 U.S. and Canadian schools and approximately 301
    international customers across 72 countries.
As of June 30, 2009, we had 997 Northstar Learning
    subscribers for our GED products.
Marketing,
    Sales and Customer Support
Marketing
    Activities
Our marketing strategy is to continually increase Study Island
    and TeacherWeb brand awareness, to introduce the Northstar
    Learning brand, and to continually generate qualified prospect
    leads for our sales teams. We focus our marketing efforts on
    individual schools, principals and teachers for sales to both
    new and existing customers.
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Our primary Study Island marketing activities include:
•
targeted campaigns to schools, such as search engine marketing,
    direct mail,
e-mail
marketing and print advertisements;
•
participation in tradeshows;
•
building on relationships with satisfied school customers to
    target new sales in other schools in the same district, in the
    entire district or in adjacent school districts;
•
customer newsletters and advertising inserts sent to schools
    with renewal reminders, including information about new and
    upgraded products;
•
webinars for existing customers introducing them to new
    products, add-on features and upgrades;
•
incentives such as free months to attract new customers or free
    trials of add-on products to attract renewals; and
•
assistance by our grant/bid writer and contract manager to
    existing customers for funding, grant requests and completion of
    district contracts.
We market TeacherWeb through tradeshows, web advertising and in
    connection with our Study Island marketing and field sales
    efforts. We are developing our marketing plans for our recently
    launched Northstar Learning product line. We have launched
    successful print advertising campaigns for Northstar Learning
    and expect additional marketing activities to be similar to
    those of Study Island, but with a focus on adult learning
    centers and alternative high schools for GED and postsecondary
    public and private institutions for developmental studies and
    allied health. We recently hired a Northstar Learning marketing
    coordinator who is responsible for search engine optimization,
    direct mail and
e-mail
marketing campaigns and participation in tradeshows to capture
    sales and qualified leads in the postsecondary market.
Study Island pricing is available on Study Island's website
    at each state landing page; TeacherWeb's pricing is
    available on TeacherWeb's website; and Northstar
    Learning's pricing is available on Northstar
    Learning's website. Our products and services are
    strategically priced to fall within the discretionary spending
    budgets of teachers and school administrators. We evaluate our
    pricing on an annual basis and determine increases to reflect
    product enhancements, operating costs, the increased value of
    our products to our customers, and inflation and other economic
    factors impacting our markets.
Field-based
    and Inside Sales Channels
We have three sales teams: a Study Island sales team, a
    TeacherWeb sales team and a Northstar Learning sales team.
The Study Island sales team, our largest, is led by our vice
    president of sales and is divided into outside or field-based
    sales representatives overseen by five regional managers, a
    smaller inside sales team and an inside account manager with a
    team focused on renewals and sales of add-on products. Our
    field-based sales representatives are strategically located in
    and are responsible for larger enrollment metropolitan customer
    bases, and our inside sales team focuses on sales in more rural
    geographies. Our Study Island sales strategy begins with
    site-based or school level contact and focuses on individual
    school principals and teachers. Additionally, the Study Island
    sales team strives to enhance customer awareness of our newer
    TeacherWeb and Northstar Learning brands.
Our TeacherWeb sales team consists of four inside sales and
    customer service representatives, who focus on selling
    TeacherWeb to existing Study Island customers as well as using
    the same Study Island inside sales model and techniques to close
    new sales at the school level. We additionally rely on our
    marketing efforts at tradeshows to generate sales leads and make
    outside sales.
Similar to the Study Island sales team, our Northstar Learning
    sales team consists of four field-based sales representatives
    (east, south, midwest and west) and two inside sales
    representatives who handle rural
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accounts, both managed by our national sales manager. This group
    will focus exclusively on adult learning centers and
    postsecondary institutions. Over time, we plan to add more sales
    representatives and eventually hire a dedicated postsecondary
    sales manager.
Customer
    Support
We provide our customers with service through our
    Implementation, Training, and Customer Relations teams. Our
    Implementation team provides free customized implementation
    assistance to schools, including contacting schools when we
    detect low levels of usage to learn how we may improve
    implementation and usage of our product in the school. Our
    Training department develops teacher and administrator training
    materials, hosts webinars and conducts site visits and in-school
    training sessions, as well as online trainings and phone
    consultations. Our Customer Relations team provides free
    unlimited support to our customers, who may contact us via
    phone, live chat or by email. Approximately 31% of our Customer
    Relations team are former teachers, and 50% have customer
    service and IT backgrounds. Our Customer Relations team also
    recently won the 2009 STEVIE AWARD, sponsored by Business Week,
    in recognition of its outstanding level of customer service.
Our
    Competition
Study Island competes primarily with other providers of
    supplemental educational materials and online learning tools. We
    believe Study Island's principal competitors include:
•
providers of online and offline supplemental instructional
    materials for the core subject areas of reading, mathematics,
    science and social studies for K-12 institutions;
•
companies that provide K-12-oriented software and online-based
    educational assessment and remediation products and services to
    students, educators, parents and educational institutions;
•
the assessment divisions of established education publishers,
    including Pearson Education, Inc., The McGraw-Hill Companies and
    Houghton Mifflin Harcourt Company;
•
providers of online and offline test preparation materials;
•
traditional print textbook and workbook companies that publish
    K-12 core subject educational materials, standardized test
    preparation materials or paper and pencil assessment tools;
•
summative assessment companies that have expanded their product
    lines to include formative assessment and instruction products;
•
non-profit and membership educational organizations and
    government agencies that offer online and offline products and
    services, including in some cases at no cost, to assist
    individuals in standards mastery and test preparation; and
•
providers of website hosting for teachers and schools.
We believe the principal competitive factors in Study
    Island's market are:
•
quality of content and deep customization to standards;
•
formative assessment and reporting to inform instruction;
•
ease of use, including whether a product is available online;
•
program efficacy and the ability to provide improved student
    outcomes;
•
ability to engage students;
•
quality of customer support;
•
vendor reputation; and
•
price.
TeacherWeb competes primarily with other similar website portal
    and teacher productivity programs designed to help educators
    create and manage classroom and school websites. The K-12 market
    for these
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solutions is highly fragmented with no dominant provider.
    TeacherWeb also competes with in-house website development
    efforts at the class, school and district level.
We believe the principal competitive factors in
    TeacherWeb's market are ease of use, comprehensiveness in
    terms of functionality, particularly education-specific
    features, and price. Other factors include, performance,
    security, scalability, flexibility and reliability of the
    service, quality of customer support and vendor reputation and
    brand awareness.
Northstar Learning competes primarily with textbook, workbook,
    study guide and software products published by the large
    postsecondary publishers, such as Pearson, McGraw-Hill, Cengage,
    Wiley and Mosby (Reed Elsevier).
We believe the principal competitive factors in Northstar
    Learning's market are similar to those outlined above for
    Study Island.
Technology
Engineering
Our Study Island, TeacherWeb and Northstar Learning systems are
    built upon lightweight platforms enabling our customers to
    access the full set of functionality via a standard browser. Our
    systems operate in a completely hosted manner, eliminating the
    need for our customers to run any special hardware or software.
    This is a basic design criteria in our software architecture, to
    provide the most extensive set of services possible that are
    completely independent from our customer's unique systems
    environment. We will continue to invest in improving the
    performance, functional depth and the usability of our services
    to better meet our customer's needs.
Our systems are constructed as highly scalable,
    software-as-a-service (SaaS) applications that use commercially
    available hardware and a combination of proprietary and
    off-the-shelf software from companies such as Adobe and
    Microsoft. Our software development team has constructed
    proprietary services and leveraged existing capabilities such as
    database connection pooling and user session management tuned to
    our specific architecture and environment, allowing us to
    continue to scale our service. This provides a stateless
    environment, in which users are not bound to a single server but
    can be routed in the most optimal way to any number of servers,
    with an advanced data caching layer.
Our systems have been implemented to allow all customers to
    operate as logically separate tenants in the central
    applications and databases. This allows us to spread the cost of
    delivering the total set of services across the user base, such
    that we do not have to manage thousands of distinct applications
    with their own business logic and database schemas. As a result,
    we have the ability to scale our application and core business
    in a very fast and efficient manner. Moreover, we can focus our
    resources on building new functionality to deliver to our
    customer base as a whole rather than on maintaining an
    infrastructure to support each of their distinct applications.
Our engineering team is constantly focused on improving and
    enhancing the features, functionality and security of our
    existing service offerings, as well as developing new
    capabilities such as the upcoming release of a new version of
    Study Island. As a result of our proven SaaS model, our existing
    customers will be able to realize the full value of these
    enhancements without the need to go through a massive upgrade
    process.
Operations
We serve all of our customers and users from a single,
    third-party web-hosting facility located in Dallas, Texas,
    leased from Colo4Dallas, Inc. The Colo4Dallas facility is built
    to a high level of availability and control and is secured by
    around-the-clock guards, biometric access screening and
    escort-controlled access, and is supported by
on-site
backup generators in the event of a power failure. Bandwidth to
    the internet is provided by multiple independent companies and
    we continuously monitor the performance of this service. The
    monitoring features that exist include centralized performance
    consoles, automated load distribution tools and various
    self-diagnostic tools and programs.
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In the fourth quarter of 2009, as part of our disaster recovery
    arrangements, all of our customers' data will be replicated
    in a separate
back-up
facility near Chicago, Illinois. This is designed to both
    protect our customers' data and ensure service continuity
    in the event of a major disaster. Even in the case of a
    catastrophic disaster at the Colo4Dallas facility, our strategy
    will allow for full operation within 24 hours or less.
Integration
    with District Student Interoperability Systems
The Study Island core web application has been designed to
    integrate with Student Interoperability Systems, or SIS, which
    employ the Student Interoperability Framework, of SIF,
    specifications, as a method for overall student tracking. SIF
    creates a common set of specifications to allow different
    applications to interact and share data, and facilitates the use
    of technology in education. The use of SIF allows Study Island
    to maintain a real-time roster for each one of its SIF enabled
    districts, and facilitates the transition of information from
    one school to another within a district. Our engineering team is
    available to work directly with a school district's
    technology team to assist with information transfers.
Intellectual
    Property
We develop proprietary educational content and assessment and
    reporting materials, and a significant majority of the questions
    and materials in our Study Island and Northstar Learning
    products have been developed internally. We rely on copyright
    protection for our internally developed content. We also own or
    license a number of trademarks, service marks, trade secrets and
    other intellectual property rights that relate to our products
    and services. We continue to invest in our intellectual property
    as we develop new content and expand the scope of our products
    and services. As appropriate, we also utilize confidentiality
    and licensing agreements with our employees, students,
    independent contractors and suppliers.
We license a portion of our content from third parties. For
    example, we currently license graphic novels from ABDO Books and
    content based on the
    "Timbertoes
®
"

    characters from Highlights for Children. We attempt to use
    internally developed or public domain material in our products
    when possible, but as we continue to develop new products and
    services, we may enter into licenses with additional third
    parties.
We own several internet domain names that include the terms
    Study Island, Archipelago Learning, TeacherWeb and Northstar
    Learning, among others.
Employees
As of June 30, 2009 we had 206 employees, consisting
    of 202 full-time and 4 part-time employees. As of
    June 30, 2009, we had 25 employees in content
    development, 113 employees in sales and marketing,
    46 employees in IT and programming, 22 general and
    administrative employees. None of our employees are represented
    by a collective bargaining agreement. We believe our employee
    relations are good.
Properties
Our corporate headquarters are located in Dallas, Texas, where
    we lease a total of 18,508 square feet of space under a
    lease that expires on May 31, 2012 and 4,656 square
    feet of space under a lease that expires on February 28,
    2010. We do not lease office space for our field-sales
    representatives.
Legal
    Proceedings
We currently are not subject to any material litigation or
    regulatory proceedings.
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MANAGEMENT
Executive
    Officers and Directors
The following table sets forth the names and ages as of
    September 2, 2009, of each person who is and who will be a
    director or executive officer of Archipelago Learning, Inc. upon
    the Corporate Reorganization and the consummation of this
    offering. The descriptions below include each such person's
    service as a board member, executive officer or employee of
    Archipelago Learning Holdings, LLC and our predecessors.
Name
Age
Position
Tim McEwen
56
President, Chief Executive Officer and Director
James Walburg
55
Executive Vice President, Chief Financial Officer and Secretary
Ray Lowrey
51
Senior Vice President and Chief Technology Officer
Cameron Chalmers
33
Vice President and Director
Julie Huston
42
Vice President of Sales
David Muzzo
34
Vice President and Director
David Phillips
32
Director
Michael Powell
46
Director
Peter Wilde
41
Chairman
Tim McEwen
has been our Chief Executive Officer since
    March 2007. From January 2004 to March, 2007, Mr. McEwen
    served as Chief Executive Officer of Harcourt Achieve, Inc., a
    multinational education company. From July 2000 to December
    2003, Mr. McEwen served as Executive Vice President and
    Chief Operating Officer of Haights Cross Communications, Inc.,
    which specializes in the development and publication of
    educational products. From 1996 to 2000, Mr. McEwen served
    as President and Chief Executive Officer of Thomson
    Learning's Higher Education and Lifelong Learning Groups
    (now Cengage Learning), a publisher of print and digital
    educational products. Mr. McEwen serves on the board of
    directors of Edline Holdings LLC, an educational technology
    company. Mr. McEwen received a B.S. in Education from East
    Stroudsburg State University and an M.S. in Education from the
    University of Georgia.
James Walburg
has been a vice president and Chief
    Financial Officer since May 2007. From January 2004 to March
    2007, Mr. Walburg served as Senior Vice President and Chief
    Financial Officer of First American Payment Systems, L.P., a
    large credit card processing company. From September 1994 to
    January 2004, Mr. Walburg served as Senior Vice President
    of Finance and Administration as well as Vice President and
    Treasurer of IMCO Recycling Inc., a publicly traded metals
    company. Prior to this, Mr. Walburg also held management
    positions at NTS, Inc. and Diamond Shamrock Corporation.
    Mr. Walburg is a certified public accountant and received a
    B.S. in Economics from the University of Pennsylvania's
    Wharton School and an M.B.A. from the Southern Methodist
    University Cox School of Business.
Ray Lowrey
has been Senior Vice President and Chief
    Technology Officer since September 2008. From July 2007 to
    September 2008, Mr. Lowrey served as a Senior Vice
    President and Chief Technology Officer of Cengage Learning, a
    publisher or print and digital educational products. Prior to
    August 2007, Mr. Lowrey also served as Chief Technology
    Officer of Thomson Gale, an educational publisher, and served in
    several senior level positions in technology management and
    software development for EG&G Mound Applied Technologies
    and Monsanto Research Corporation. Mr. Lowrey received a
    B.S. in Computer Science and an M.B.A. from the University of
    Dayton.
Cameron Chalmers
co-founded Study Island, in May 2000 and
    has been Vice President and Director since January 2007. Prior
    to founding us, Mr. Chalmers served as a software
    engineering Lead Developer for Lucent Technologies.
    Mr. Chalmers received a B.S. from Vanderbilt University.
    Mr. Chalmers intends to resign from the board of directors
    upon the consummation of this offering but will continue to
    serve as Vice President.
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Julie Huston
has been our Vice President of Sales since
    April 2008. Ms. Huston joined us as an independent
    contractor as a Michigan sales representative in August 2002. In
    January 2007, Ms. Huston was employed by us as a regional
    sales manager before becoming our Vice President of Sales in
    April 2008. Prior to joining us, Ms. Huston was Co-Founder
    and President of Training Express. From 1989 to 1991,
    Ms. Huston also served as Director of Public Relations and
    Advertising for Olympia Entertainment. Ms. Huston received
    a B.A. in English from the University of Michigan.
David Muzzo
co-founded Study Island in May 2000 and has
    been Vice President and Director since January 2007. Prior to
    founding us, Mr. Muzzo co-founded Captive Marketing
    Concepts, an advertising firm specializing in indoor billboard
    advertising which was later sold to AJ Indoor Advertising in
    1999. Mr. Muzzo received a B.S. from Vanderbilt University.
    Mr. Muzzo intends to resign from the board of directors
    upon the consummation of this offering but will continue to
    serve as Vice President.
David Phillips
has been a member of our board of
    directors since January 2007. Mr. Phillips is a Vice
    President of Providence Equity Partners. Prior to joining
    Providence Equity Partners in 2005, Mr. Phillips worked at
    Hutchison Whampoa China and at Goldman Sachs in the Principal
    Investment Area. Mr. Phillips serves on the board of
    directors of Edline Holdings LLC, an educational technology
    company, and JBP Holdings, LLC, which owns Assessment
    Technologies Institute, a provider of online educational
    products, and Jones & Bartlett Publishers, an educational
    publisher for higher education and vocational training.
    Mr. Phillips received a B.A. from Princeton University and
    an M.B.A. from Harvard Business School.
Michael Powell
has been a member of our board of
    directors since December 2008. Mr. Powell is the chairman
    and chief executive of the MK Powell Group, a communications
    consulting firm, where he has been employed since April 2005.
    Mr. Powell served also as a Senior Advisor of Providence
    Equity Partners since July 2005. From January 2001 to April
    2005, Mr. Powell served as Chairman of the Federal
    Communications Commission and just prior, from October 1997 to
    December 2000, as a Commissioner. From December 1996 to October
    1997, Mr. Powell served as Chief of Staff of the Antitrust
    Division of the Department of Justice. From July 1994 to
    December 1996, Mr. Powell was an associate in the law firm
    of O'Melveny & Meyers and clerked for the Hon.
    Harry T. Edwards, Chief Judge of the U.S. Court of Appeals
    for the D.C. Circuit from July 1993 to July 1994. From March
    1988 to July 1990, Mr. Powell served as a policy advisor to
    Secretary of Defense Richard B. Cheney. Mr. Powell serves
    on the board of directors of Cisco Systems, Altegrity, Object
    Video, the Rand Corporation, the Aspen Institute and
    America's Promise. He also serves on the board of advisors
    for the Disabled Veterans for Life Memorial effort.
    Mr. Powell received a B.A. in Government from the College
    of William and Mary and received a J.D. from Georgetown
    University Law Center.
Peter Wilde
has been a member of our board of directors
    and Chairman since January 2007. Mr. Wilde is a Managing
    Director of Providence Equity Partners. Prior to joining
    Providence Equity Partners in 2002, Mr. Wilde was a General
    Partner at BCI Partners, where he began his career in private
    equity investing in 1992. Mr. Wilde is also a director of
    Asurion Corp., a provider of wireless subscriber services,
    Decision Resources, Inc., a provider of healthcare research,
    Edline Holdings LLC, an educational technology company,
    Education Management Corporation, a provider of post-secondary
    education, JBP Holdings, LLC, which owns Assessment Technologies
    Institute, a provider of online educational products, and Jones
    & Bartlett Publishers, an educational publisher for higher
    education and vocational training, Kerasotes Theatres, Inc., a
    motion picture exhibition company, and Survey Sampling
    International LLC. Mr. Wilde received a B.A. from Colorado
    College and an M.B.A. from Harvard Business School.
Board of
    Directors
Our business and affairs are managed under the direction of our
    board of directors. Our bylaws will provide that our board of
    directors will consist of
    between          
    and          
    directors. Upon the consummation of this offering, our board of
    directors will consist
    of          
    directors.
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Director
    Independence and Controlled Company Exception
Our board of directors has affirmatively determined
    that          
    are independent directors under the applicable rules of the NYSE
    and Nasdaq and as such term is defined in
Rule 10A-3(b)(1)
under the Exchange Act.
After completion of this offering, Providence Equity Partners
    will continue to control a majority of our outstanding common
    stock. As a result, we are a "controlled company"
    within the meaning of the NYSE and Nasdaq corporate governance
    standards. Under these rules, a "controlled company"
    may elect not to comply with certain NYSE or Nasdaq corporate
    governance standards, including:
•
the requirement that a majority of the board of directors
    consist of independent directors;
•
the requirement that we have a nominating and corporate
    governance committee that is composed entirely of independent
    directors with a written charter addressing the committee's
    purpose and responsibilities;
•
the requirement that we have a compensation committee that is
    composed entirely of independent directors with a written
    charter addressing the committee's purpose and
    responsibilities; and
•
the requirement for an annual performance evaluation of the
    nominating and corporate governance committee and compensation
    committee.
Following this offering, we intend to utilize these exemptions.
    As a result, we will not have a majority of independent
    directors, our nominating and corporate governance committee and
    compensation committee will not consist entirely of independent
    directors and such committees will not be subject to annual
    performance evaluations. Accordingly, you will not have the same
    protections afforded to shareholders of companies that are
    subject to all of the NYSE or Nasdaq corporate governance
    requirements.
Board
    Committees
Our board of directors has the authority to appoint committees
    to perform certain management and administration functions. Upon
    the consummation of this offering, our board of directors will
    have three committees: the audit committee, the compensation
    committee, the nominating and corporate governance committee.
Audit
    Committee
The primary purpose of the audit committee is to assist the
    board's oversight of:
•
the integrity of our financial statements;
•
our systems of control over financial reporting and disclosure
    controls and procedures;
•
our compliance with legal and regulatory requirements;
•
our independent auditors' qualifications and independence;
•
the performance of our independent auditors and our internal
    audit function;
•
all related person transactions for potential conflict of
    interest situations on an ongoing basis; and
•
the preparation of the report required to be prepared by the
    committee pursuant to SEC rules.
Upon the consummation of this offering,
    Messrs.           ,          
    and          
    will serve on the audit committee.
    Mr.           
    will serve as chairman of the audit committee and also qualifies
    as an "audit committee financial expert" as such term
    has been defined by the SEC in Item 401(h)(2) of
Regulation S-K.
Our board of directors has affirmatively determined that
    Messrs.           ,          
    and          
    meet the definition of "independent directors" for the
    purposes of serving on the audit committee
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under applicable SEC and the NYSE and Nasdaq rules, and we
    intend to comply with these independence requirements within the
    time periods specified.
Compensation
    Committee
The primary purpose of our compensation committee is to:
•
recommend to our board of directors for consideration, the
    compensation and benefits of our executive officers and key
    employees;
•
monitor and review our compensation and benefit plans;
•
administer our stock and other incentive compensation plans and
    programs and prepare recommendations and periodic reports to the
    board of directors concerning such matters;
•
prepare the compensation committee report required by SEC rules
    to be included in our annual report;
•
prepare recommendations and periodic reports to the board of
    directors as appropriate; and
•
handle such other matters that are specifically delegated to the
    compensation committee by our board of directors from time to
    time.
Upon the consummation of this offering,
    Messrs.           ,          
    and          
    will serve on the compensation committee, and
    Mr.           
    will serve as the chairman. Our board of directors has
    affirmatively determined that each
    of          ,          
    and          
    meets the definition of "outside director" for the
    purposes of Section 162(m) of the Internal Revenue Code of
    1986, as amended.
Nominating
    and Corporate Governance Committee
The primary purpose of the nominating and corporate governance
    committee is to:
•
identify and recommend to the board individuals qualified to
    serve as directors of our company and on committees of the board;
•
advise the board with respect to the board composition,
    procedures and committees;
•
develop and recommend to the board a set of corporate governance
    guidelines and principles applicable to us; and
•
review the overall corporate governance of our company and
    recommend improvements when necessary.
Upon the consummation of this offering,
    Messrs.           ,          
    and          
    will serve on the nominating and corporate governance committee,
    and
    Mr.           
    will serve as the chairman.
Compensation
    Committee Interlocks and Insider Participation
Upon the completion of this offering, none of our executive
    officers will serve on the compensation committee or board of
    directors of any other company of which any of the members of
    our compensation committee or any of our directors is an
    executive officer.
Code of
    Business Conduct and Ethics
We have adopted a code of business conduct and ethics that
    applies to all of our employees, officers and directors,
    including those officers responsible for financial reporting.
    These standards are designed to deter wrongdoing and to promote
    honest and ethical conduct. The code of business conduct and
    ethics will be available on our website at
    www.archipelagolearning.com. Any amendments to the code, or any
    waivers of its requirements, will be disclosed on our website.
    The information that appears on our website is not part of, and
    is not incorporated into, this prospectus.
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Executive
    Officers
Each of our executive officers has been elected by our board of
    directors and will serve until his or her successor is duly
    elected and qualified.
Director
    Compensation
Prior to this offering, we have not paid our directors any
    compensation for their board service.
    On          ,
    our board of directors approved a plan for annual compensation
    for our directors who are not our employees or employees of
    Providence Equity Partners, effective as of the date of the
    consummation of this offering. These directors will receive an
    annual retainer of $      and a fee of
    $      for each meeting they attend.
    The annual retainer will be payable at the director's
    option either 100% in cash or 100% in shares of our common
    stock. In addition, these directors will receive an annual
    restricted share award with a grant date fair market value of
    $          ,
    which will vest on the first anniversary of the grant date. The
    non-management chair of the audit committee will receive an
    additional $      fee payable at his or
    her option either 100% in cash or 100% in shares of our common
    stock. No separate committee meeting fees will be paid.
All directors are reimbursed for reasonable travel and lodging
    expenses incurred by them in connection with attending board and
    committee meetings.
Indemnification
    of Officer and Directors
Our certificate of incorporation and bylaws provide that we will
    indemnify our directors and officers to the fullest extent
    permitted by Delaware General Corporation Law, or DGCL. Upon the
    completion of this offering, we intend to have in place
    directors' and officers' liability insurance that
    insures such persons against the costs of defense, settlement or
    payment of a judgment under certain circumstances.
In addition, our certificate of incorporation will provide that
    our directors will not be liable for monetary damages for breach
    of fiduciary duty, except for liability relating to any breach
    of the director's duty of loyalty, acts or omissions not in
    good faith or which involve intentional misconduct or a knowing
    violation of law, violations under Section 174 of the DGCL
    or any transaction from which the director derived an improper
    personal benefit.
In addition, prior to the completion of this offering, we will
    enter into indemnification agreements with each of our executive
    officers and directors. The indemnification agreements will
    provide the executive officers and directors with contractual
    rights to indemnification, expense advancement and
    reimbursement, to the fullest extent permitted under the
    Delaware General Corporation Law.
There is no pending litigation or proceeding naming any of our
    directors or officers to which indemnification is being sought,
    and we are not aware of any pending or threatened litigation
    that may result in claims for indemnification by any director or
    officer.
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COMPENSATION
    DISCUSSION AND ANALYSIS
This compensation discussion and analysis section provides
    information about the material elements of the compensation
    paid, awarded to or earned by our "named executive
    officers," who consist of our chief executive officer, our
    senior vice president and chief financial officer, and our four
    other most highly compensated executive officers. For 2008, the
    named executive officers were:
•
Tim McEwen, our President and Chief Executive Officer;
•
James Walburg, our Executive Vice President, Chief Financial
    Officer and Secretary;
•
Ray Lowrey, our Senior Vice President and Chief Technology
    Officer;
•
Cameron Chalmers, our Vice President and Director;
•
Julie Huston, our Vice President of Sales; and
•
David Muzzo, our Vice President and Director.
This compensation discussion and analysis section addresses and
    explains the compensation practices that were followed in 2008
    and prior periods, the numerical and related information in the
    summary compensation and other tables presented below as well as
    a discussion of our anticipated future compensation policy and
    approach.
History
Prior to this offering, we were a privately held company with a
    limited number of equityholders. As such, we have not been
    subject to stock exchange listing requirements or SEC rules
    requiring a majority of our board of directors be independent or
    relating to the formation and functioning of board committees,
    including a compensation committee. We intend to establish a
    compensation committee in connection with this offering.
Most, if not all, of our prior compensation policies have been
    the product of negotiations between the named executive officers
    and our founders or the board of managers of Archipelago
    Learning Holdings, LLC. Prior to the Providence Equity
    Transactions, compensation for all of our employees was
    determined solely by our founders, Messrs. Chalmers and
    Muzzo. In connection with the Providence Equity Transactions and
    the hiring of Messrs. McEwen, Walburg and Lowrey, we
    entered into employment agreements with our founders,
    Mr. Chalmers and Mr. Muzzo, as well as with certain of
    our named executive officers, including Mr. McEwen,
    Mr. Walburg and Mr. Lowrey. In August 2009, we
    entered into an employment agreement with Ms. Huston. In
    August 2009, Messrs. McEwen and Walburg entered into new
    employment agreements, which we refer to as each of their
    "new employment agreements." The terms of all of those
    employment agreements were negotiated by the employee and the
    board of managers of Archipelago Learning Holdings, LLC.
    Compensation decisions for 2008 relating to our named executive
    officers who were party to employment agreements, including the
    determination of annual bonuses and other incentive-based
    awards, were also made by the board of managers of Archipelago
    Learning Holdings, LLC. Compensation decisions for 2008 relating
    to Ms. Huston, the only named executive officer who did not
    have employment agreement in 2008, were made collectively by
    Messrs. McEwen and Walburg, in consultation with the board
    of managers of Archipelago Learning Holdings, LLC.
Objectives
    and Philosophy of Executive Compensation Policy
Our objective is to maintain a compensation policy that provides
    a competitive total executive compensation package that attracts
    and retains individuals of exceptional ability and managerial
    talent in a highly competitive market. Our executive
    compensation program is designed to align executive compensation
    with our key strategic, financial and operational goals and with
    the long-term interests of our stockholders.
After the consummation of this offering, the compensation
    committee will be responsible for implementing and administering
    all aspects of our benefits and compensation plans and programs.
    Members of our compensation committee will be "outside
    directors" for the purposes of Section 162(m) of the
    Internal
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Revenue Code, as amended. We anticipate that the compensation
    committee will make certain determinations in consultation with
    and based on recommendations by Messrs. McEwen and Walburg.
For 2009, the compensation committee will review overall company
    and individual performance, as well as the applicable terms of
    any employment agreements, in connection with the review and
    determination of each named executive officer's
    compensation. For company performance, it is anticipated that
    the compensation committee will review service revenue, invoiced
    sales and Adjusted EBITDA. See "Prospectus
    Summary — Summary Historical Consolidated Financial
    and Other Data" and "Management's Discussion and
    Analysis of Financial Condition and Results of
    Operations — Components of Service Revenue and
    Expense" for more detailed descriptions of these metrics.
    As an emerging growth company, we believe that increasing
    revenue and profitability are directly related to increasing
    stockholder value and linking compensation with company
    performance in these areas is supportive of the long-term
    interests of stockholders. Ms. Huston's performance
    will also be based on the achievement of sales goals, including
    overall sales, new business sales and sales to existing
    customers. For individual performance, we also anticipate that
    the compensation committee will review the executive's
    achievement of non-financial objectives and will consult with
    and consider the recommendations of Mr. McEwen. The
    compensation committee may also make compensation decisions on a
    discretionary basis.
We anticipate that in future periods, the compensation committee
    may engage an independent outside compensation consultant to
    construct a peer group of companies, provide market information,
    provide advice on market practices and support specific
    decisions regarding compensation for named executive officers.
    In addition, we expect that Messrs. McEwen and Walburg, in
    consultation with the board of directors, will establish an
    annual budget that will include sales targets and other
    performance-related goals, which the compensation committee may
    consult in making decisions with respect to bonuses and other
    payments.
Tax and
    Accounting Considerations
While we generally considered the financial accounting and tax
    implications of our executive compensation, neither element was
    a material consideration in the compensation awarded to our
    named executive officers in 2008.
Elements
    of Executive Compensation
Our executive compensation includes the following elements: base
    salaries, annual performance bonuses, an equity compensation
    plan, a defined contribution plan and a benefits package.
Base
    Salary
We establish base salaries for our executive officers generally
    based on the scope and essential elements of each of his or her
    duties, as well as the abilities, performance and experience of
    the named executive officers. We seek to set these salaries
    competitively, with the intent to attract and retain our key
    executive officers. Each of Messrs. McEwen's,
    Walburg's, Lowrey's, Muzzo's and Chalmers's
    and Ms. Huston's employment agreement establishes
    their respective base salaries, which may be increased at the
    discretion of the board of managers of Archipelago Learning
    Holdings, LLC. The board of managers of Archipelago Learning
    Holdings, LLC approved increases in each of
    Messrs. McEwen's, Walburg's, Chalmers's and
    Muzzo's base salaries for 2008 and approved increases in
    each of Messrs. McEwen's and Walburg's base
    salaries for 2009. The board of managers of Archipelago Learning
    Holdings, LLC also approved each of Messrs. McEwen's and
    Walburg's new employment agreements. See
    "— Employment Agreements."
    Ms. Huston's base salary for 2008 was established by
    the board of managers of Archipelago Learning Holdings, LLC in
    consultation with Messrs. McEwen and Walburg and has been
    reviewed on an annual basis, based on factors including the
    general performance of our sales team, growth into additional
    sales markets resulting in increased responsibility, the growth
    of our sales team and annual increases in our sales. We
    anticipate that Messrs. McEwen and Walburg will continue to
    make recommendations and consult with our board of directors and
    the compensation committee in making compensation decisions
    after the completion of this offering.
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Annual
    Performance Bonus
We believe it is important to provide cash incentive bonuses to
    provide incentives for our executive officers to meet annual
    company and individual objectives established by our board of
    directors, in consultation with Messrs. McEwen and Walburg
    (other than bonuses for the chief executive officer and chief
    financial officer, which were established solely by the board of
    managers of Archipelago Learning Holdings, LLC and will be
    established by our board of directors), and to reward
    performance for meeting those objectives. Bonus arrangements are
    identified in employment agreements and are generally determined
    by company performance as measured against the budget for the
    applicable year. For a discussion of the bonus arrangements in
    the employment agreements for the named executive officers and
    for amounts awarded in 2008, see "— Employment
    Agreements" and "— Grants of Plan-Based
    Awards in 2008." In 2008, the board of managers of
    Archipelago Learning Holdings, LLC made discretionary
    adjustments to the bonus payments to Messrs. McEwen,
    Walburg, Chalmers and Muzzo set forth in their respective
    employment agreements. We anticipate that the compensation
    committee will also exercise a measure of discretion in
    determining bonus awards in future periods.
Executive officers and other employees who are not party to
    employment agreements are also eligible for annual performance
    bonuses. Ms. Huston, as the Vice President of Sales, is
    eligible for a performance bonus twice a year, as set forth in
    her employment agreement, and prior to her entry into an
    employment agreement, as established by the board of directors
    in consultation with Messrs. McEwen and Walburg, reflecting
    performance during the two six-month sales cycles in a calendar
    year, ending in June and December. Historically,
    Messrs. McEwen and Walburg have determined
    Ms. Huston's bonus based on the results during the
    applicable period as compared with target sales levels,
    previously set according to a formula tied to overall sales
    results for the business and specific performance targets. We
    expect that the compensation committee will continue to assess
    Ms. Huston's and other members of the sales
    team's performance bonus in this manner after the
    consummation of this offering. Bonus payments for
    Messrs. McEwen, Walburg, Lowrey, Chalmers and Muzzo are
    made once a year after our financial results for the prior year
    are available. Bonus payments for our other executive officers
    and employees are made twice a year, based on six-month
    performance periods. We expect that the compensation committee
    will consult with Messrs. McEwen and Walburg and continue
    to assess these performance bonuses in a similar manner after
    the consummation of this offering.
Equity
    Compensation Plan
In connection with the Providence Equity Transactions, we
    established the 2007 Equity Compensation Plan as a long-term
    compensation program that compensates our executive officers and
    certain other employees using equity-based awards and
    accordingly compensates our executive officers and certain other
    employees based on the value of our equity. We believe that when
    our executive officers possess an ownership interest in us, they
    have a continuing stake in our long-term success.
Under the 2007 Equity Compensation Plan we granted Class B
    and Class C shares in Archipelago Learning Holdings, LLC to
    our executive officers and certain other employees in accordance
    with the terms of the Archipelago Learning Holdings, LLC
    Agreement. These participation shares were granted to employees
    who we determined to be key employees for our business, in
    connection with certain employee promotions and to certain newly
    hired employees. The Class B shares vest over time subject
    to the participant's continued employment with or service
    to Archipelago Learning, LLC. The Class C shares are
    subject to performance hurdles and holders of the Class C
    are shares only entitled to distributions if he or she is
    employed by or provides service to Archipelago Learning, LLC at
    the time that distributions are made.
Each vested Class B share and Class C share is
    entitled to participate in distributions in accordance with the
    terms of the Archipelago Learning Holdings, LLC Agreement. No
    holder of Class B or Class C shares is eligible to
    receive distributions until the holders of the Class A
    shares have received distributions equal to 100% of their
    capital contributions and the holders of Class A and
    Class A-2 shares have also received a preferred return of
    12% per annum on the Class A capital contributions. Once
    these distributions have been made, holders of the Class A,
Class A-2
and vested Class B shares become eligible to receive
    distributions subject to cumulative percent limitations. No
    distribution can be made on account of a Class B
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share that has not yet vested. Amounts that would otherwise be
    paid on account of these shares are credited to the
    member's capital accounts and will be distributed once
    these shares have vested. If any unvested shares are forfeited,
    such amounts will be distributed to the Class A and
Class A-2
holders on a pro rata basis, in proportion to the number of
    shares held by Class A and
Class A-2
holders. In addition, some of the Class B shares are
    subject to a distribution threshold, which means they are not
    entitled to receive any portion of any distribution until the
    aggregate amount of distributions on all shares outstanding on
    the date of grant of such Class B shares has exceeded a
    specified distribution threshold. Once the distribution
    threshold has been met, such Class B shares are entitled to
    participate in distributions. The Class C shares are not
    entitled to any portion of any distributions until the holders
    of Class A and
Class A-2 shares
have received certain multiples of cash-based returns on their
    respective investment in the Class A and
Class A-2 shares.
Once the Class B and Class C shares become entitled to
    participate in distributions, each Class B and Class C
    share entitled to participate in a distribution is entitled to a
    pro rata amount of the distribution payable on the Class B
    shares and Class C shares, respectively, in proportion to
    the total number of Class B shares and Class C shares,
    respectively.
All Class C shares and any unvested Class B shares
    will be forfeited if any participant is no longer our employee.
    All Class B and Class C shares will be forfeited if
    the participant's employment is terminated by us for cause
    or by the participant without good reason. In addition, all
    Class B shares and Class C shares will be forfeited
    upon a holder's breach of any covenants relating to
    non-competition, non-solicitation or non-disclosure in any
    agreement.
The initial public offering is treated as a liquidation event of
    Archipelago Learning Holdings, LLC, and holders of Class B
    shares and Class C shares will receive our common stock,
    restricted common stock and/or restricted stock unit awards in
    an amount equal to the value they would have received upon a
    liquidation of Archipelago Learning Holding, LLC with
    liquidation proceeds implied by the initial public offering
    price. In connection with this offering and upon the
    consummation of the Corporate Reorganization, Archipelago
    Learning, Inc. will:
•
issue an aggregate
    of           shares
    of common stock to our officers, directors and employees who
    hold Class B shares of Archipelago Learning Holdings, LLC
    in exchange for all of their vested Class B shares;
•
issue an aggregate
    of           shares
    of restricted common stock subject to time-based vesting to our
    officers, directors and employees in exchange for all of their
    unvested Class B shares of Archipelago Learning Holdings,
    LLC;
•
issue an aggregate
    of           shares
    of common stock and an aggregate
    of          
    restricted stock, unit awards subject to vesting based on, among
    other things, the trading price of our common stock, to our
    officers, directors and employees (other than our chief
    executive officer, chief financial officer, chief technology
    officer and co-founders) in exchange for their Class C
    Shares; and
•
issue an aggregate
    of           shares
    of restricted common stock and an aggregate
    of          
    restricted stock unit awards, in each case subject to vesting
    based on, among other things, the cash returns to Providence
    Equity Partners in respect of shares of common stock held by
    Providence Equity Partners, to our chief executive officer,
    chief financial officer, chief technology officer and
    co-founders in exchange for their Class C shares.
See "Corporate Reorganization" and "Certain
    Relationships and Related Person Transactions."
In addition, in connection with this offering, our board of
    directors will adopt a new equity benefit plan as described
    under "— 2009 Omnibus Incentive Plan"
    pursuant to which a total
    of           shares
    of our common stock will be reserved for issuance. The
    compensation committee will determine, subject to any employment
    agreements, any future equity awards that each named executive
    officer will be granted pursuant to the 2009 Omnibus Incentive
    Plan.
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Other
    Benefits
We provide the following benefits to our named executive
    officers on the same basis as other eligible employees:
•
health, vision and dental insurance;
•
life insurance;
•
long-term and short-term disability; and
•
a 401(k) defined contribution retirement plan.
In addition, we provide a matching contribution to all employees
    of up to 3% of employee contributions to the defined
    contribution retirement plan, plus 50% of the amount of the plan
    participant's deferred compensation that exceeds 3% of the
    participant's compensation, but not in excess of 5% of the
    participant's compensation.
Summary
    Compensation Table
The following table sets forth certain information with respect
    to compensation for the years ended December 31, 2008, 2007
    and 2006 earned by or paid to our named executive officers.
Class B
Class C
Cash
Equity
Equity
All Other
Salary(1)
Bonus
Awards(2)
Awards(2)
Compensation
Total
Name and Principal Position
Year
($)
($)
($)
($)
($)
($)
Tim McEwen
2008
259,875
123,750
150,929
—
6,404
540,958
President and
2007
199,904
—
146,794
121,717
134,059
602,474
Chief Executive Officer(3)
2006
—
—
—
—
—
—
James Walburg
2008
215,000
100,000
27,965
6,086
9,308
358,359
Executive Vice President,
2007
118,974
—
23,854
19,779
2,667
165,274
Chief Financial Officer and
2006
—
—
—
—
—
—
Secretary(4)
Ray Lowrey
2008
82,462
75,000
—
—
6,074
163,536
Senior Vice President and
2007
—
—
—
—
—
—
Chief Technology Officer(5)
2006
—
—
—
—
—
—
Julie Huston
2008
136,788
102,500
9,099
6,086
9,613
264,086
Vice President of Sales(6)
2007
134,203
22,760
5,505
4,564
4,815
171,847
2006
249,829
—
—
—
—
249,829
Cameron Chalmers
2008
131,250
125,000
56,598
—
5,285
318,133
Vice President(7)
2007
125,000
—
55,048
45,644
4,938
230,630
2006
213,200
—
—
—
—
213,200
David Muzzo
2008
131,250
125,000
56,598
—
8,973
321,821
Vice President(8)
2007
125,000
—
55,048
45,644
4,938
230,630
2006
213,200
—
—
—
—
213,200
(1)
Reflects base salary earned during the fiscal year covered.
(2)
Reflects the compensation expense we recognized in 2008 and 2007
    for financial statement reporting purposes under FASB Statement
    No. 123(R) with respect to grants of Class B and C
    participations shares to the named executive officer. These
    values have been determined based on the assumptions set forth
    in Note 11 to our consolidated financial statements for
    2008.
(3)
Mr. McEwen elected to defer payment of his 2007 salary in
    the amount of $199,904 to 2008. Mr. McEwen's "All
    Other Compensation" for 2008 includes $340 for group term
    life insurance and $6,064
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of 401(k) matching benefits. Mr. McEwen's "All
    Other Compensation" for 2007 includes $134,059 of
    relocation expenses.
(4)
Mr. Walburg's "All Other Compensation" for
    2008 includes $258 for group term life insurance, $450 for
    unused vacation days and $8,600 of 401(k) matching benefits.
    Mr. Walburg's "All Other Compensation" for
    2007 includes $2,667 of 401(k) matching benefits.
(5)
Mr. Lowrey's "All Other Compensation" for
    2008 includes $92 for group term life insurance and $5,982 of
    relocation expenses.
(6)
Ms Huston's "All Other Compensation" for 2008
    includes $41 for group term life insurance and $9,572 of 401(k)
    matching benefits. Ms Huston's "All Other
    Compensation" for 2007 includes $4,815 of 401(k) matching
    benefits. Ms. Huston was engaged as an independent
    contractor until January 2007, at which point she became
    employed by us first as Regional Sales Manager and subsequently
    as the Vice President of Sales. In 2006 she received $249,829 as
    total compensation for her work as an independent contractor
    sales representative. An employment agreement was entered into
    with Ms. Huston on August 28, 2009. See
    " — Employment Agreements."
(7)
Mr. Chalmers's "All Other Compensation" for
    2008 includes $35 for group term life insurance and $5,250 of
    401(k) matching benefits. Mr. Chalmers's "All
    Other Compensation" for 2007 includes $4,938 of 401(k)
    matching benefits.
(8)
Mr. Muzzo's "All Other Compensation" for
    2008 includes $35 for group term life insurance and $8,938 of
    401(k) matching benefits. Mr Muzzo's "All Other
    Compensation" for 2007 includes $4,938 of 401(k) matching
    benefits.
Grants of
    Plan-Based Awards in 2008
The following table sets forth certain information with respect
    to grants of plan-based awards for the year ended
    December 31, 2008 with respect to the named executive
    officers.
All Other
Estimated Future Payouts Under Equity
Equity
Incentive Plan Awards(2)
Awards:
Estimated Future Payouts Under Non-Equity Incentive Plan
    Awards(1)
Number
Number of
Grant
Threshold
Target
Maximum
Threshold
Target
Maximum
of Shares
Shares(3)
Name
Date
($)
($)
($)
(#)
(#)
(#)
(#)
(#)
Tim McEwen
—
103,950
129,938
—
—
—
—
—
James Walburg
May 7, 2008
—
86,000
107,500
—
91,288
—
91,288
91,288
Ray Lowrey
—
—
55,000
—
—
—
—
—
Julie Huston
May 7, 2008
—
—
91,288
—
91,288
91,288
Cameron Chalmers
—
87,544
87,544
—
—
—
—
—
David Muzzo
—
87,544
87,544
—
—
—
—
—
(1)
Represents payments made pursuant to the annual performance
    bonus described under "— Elements of Executive
    Compensation — Annual Performance Bonus" and as
    set forth in the employment agreements described under
    "— Employment Agreements."
    Messrs. McEwen's, Walburg's and Lowrey's
    target amounts are equal to 40% of each of his base salary, and
    their maximum amounts are equal to 50% of each of his base
    salary, subject to increases or decreases at the discretion of
    the board of managers of Archipelago Learning Holdings, LLC.
    Messrs. Chalmers's and Muzzo's target amounts and
    maximum amounts are equal to two-thirds of each of his base
    salary, subject to increases or decreases at the discretion of
    the board of managers of Archipelago Learning Holdings, LLC. For
    2008, Ms. Huston's compensation was determined by
    board of managers of Archipelago Learning Holdings, LLC in
    consultation with Messrs. McEwen and Walburg. The board of
    managers of Archipelago Learning Holdings, LLC determined that
    each of Messrs. McEwen, Walburg, Chalmers and Muzzo would
    be awarded bonus amounts exceeding the maximum amounts set forth
    for 2008.
footnotes continued on following page
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(2) Represents grants of Class C shares pursuant to the
    2007 Equity Compensation Plan. Holders of Class C shares
    are entitled to distributions after holders of Class A and
Class A-2 shares
receive certain threshold multiples of cash-based returns on
    their respective Class A and
Class A-2 shares,
subject to such Class C share holders' continued
    employment by us. See "— Elements of Executive
    Compensation — Equity Compensation Plan."
(3)
Represents grants of Class B shares, which vest ratably
    over five years from the grant date. See
    "— Elements of Executive Compensation —
    Equity Compensation Plan."
Outstanding
    Equity Awards at 2008 Fiscal Year-End
The following table sets forth certain information with respect
    to outstanding equity awards of our named executive officers as
    of December 31, 2008 with respect to the named executive
    officers. The market value of the shares in the following table
    is the fair value of such shares at December 31, 2008.
Equity Incentive
Equity Incentive
Plan Awards:
Plan Awards:
Market Value of
Number of Shares
Market Value of
Number of Shares
Shares That Have
That Have Not
Shares That Have
That Have Not
Not Vested ($)
Name
Vested (#)
Not Vested ($)(1)
Vested (#)(3)
(1)(3)
Tim McEwen
Class B Shares(2)
1,947,468
$
1,226,905
—
—
Class C Shares(3)
—
—
2,434,335
$
365,150
James Walburg
Class B Shares(2)
407,751
$
245,929
—
—
Class C Shares(3)
—
—
486,867
$
70,291
Ray Lowrey
Class B Shares(2)
—
—
—
—
Class C Shares(3)
—
—
Julie Huston
Class B Shares(2)
164,318
$
92,566
—
—
Class C Shares(3)
—
—
182,576
$
24,648
Cameron Chalmers
—
Class B Shares(2)
456,439
$
287,556
—
—
Class C Shares(3)
—
—
639,014
$
95,852
David Muzzo
Class B Shares(2)
456,439
$
287,556
—
—
Class C Shares(3)
—
—
639,014
$
95,852
(1)
The market value of unvested shares is based on
    management's determination of the fair market value at
    December 31, 2008 computed in accordance with
    SFAS No. 123(R).
(2)
The unvested Class B shares vest ratably on an annual basis
    over five years. As of December 31, 2008, 486,867 of
    Mr. McEwen's Class B shares were scheduled to
    vest on January 10 of each of 2009, 2010, 2011 and 2012. As of
    December 31, 2008, 79,116 of Mr. Walburg's
    Class B shares were scheduled to vest on January 10 of each
    of 2009, 2010, 2011 and 2012, and 18,258 of
    Mr. Walburg's Class B shares were scheduled to
    vest on May 7 of each of 2009, 2010, 2011, 2012 and 2013. As of
    December 31, 2008, Mr. Lowrey had no Class B
    shares. As of December 31, 2008, 18,258 of
    Ms. Huston's Class B shares were scheduled to
    vest on January 10 of each of 2009, 2010, 2011, 2012 and 2013,
    and 18,258 of Ms. Huston's Class B shares were
    scheduled to vest on May 7 of each of 2009, 2010, 2011, 2012 and
    2013. As of December 31, 2008, 182,575 of
    Mr. Chalmers' Class B shares were scheduled to
    vest on
footnotes continued on following page
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January 10 of 2009 and 91,288 of Mr. Chalmers'
    Class B shares were scheduled to vest on January 10 of
    each of 2010, 2011 and 2012. As of December 31, 2008,
    182,575 of Mr. Muzzo's Class B shares were
    scheduled to vest on January 10 of 2009 and 91,288 of
    Mr. Muzzo's Class B shares were scheduled to vest
    on January 10 of each of 2010, 2011 and 2012.
(3)
Holders of Class C shares are entitled to distributions
    after holders of Class A and
Class A-2 shares
receive certain threshold multiples of cash-based returns on
    their respective Class A and
Class A-2 shares,
subject to such Class C share holders' continued
    employment by us.
Stock
    Vested
The following table sets forth certain information with respect
    to equity awards of our named executive officers that have fully
    vested as of December 31, 2008 with respect to the named
    executive officers.
Number of
Shares Acquired
Value Realized
on Vesting
on Vesting
Name
(#)(1)
($)(2)
Tim McEwen
486,867
306,726
James Walburg
79,116
49,843
Ray Lowrey
—
—
Julie Huston
18,258
11,502
Cameron Chalmers
182,575
115,022
David Muzzo
182,575
115,022
(1)
Represents Class B shares for each of Messrs. McEwen,
    Walburg, Chalmers and Muzzo and Ms. Huston that in each
    case were granted on May 22, 2007 and vested on
    January 10, 2008.
(2)
Represents management's determination of the fair market
    value at December 31, 2008 computed in accordance with
    SFAS No. 123(R).
Pension
    Benefits
In the year ended December 31, 2008, our named executive
    officers received no pension benefits and had no accumulated
    pension benefits.
Nonqualified
    Deferred Compensation
In the year ended December 31, 2008, our named executive
    officers received no nonqualified deferred compensation and had
    no deferred compensation balances.
Potential
    Payments Upon Termination or Upon Change in Control
The information below describes and quantifies certain
    compensation that would become payable under each named
    executive officer's employment agreement if, as of
    December 31, 2008, his employment had been terminated, if
    80% of the voting securities of Archipelago Learning Holdings,
    LLC or its subsidiaries were to be sold or if all or
    substantially all of the assets of Archipelago Learning
    Holdings, LLC or its subsidiaries were to be sold. Due to the
    number of factors that affect the nature and amount of any
    benefits provided upon the events discussed below, any actual
    amounts paid or distributed may be different. Factors that could
    affect these amounts include the timing during the year of any
    such event.
Each of Messrs. McEwen, Walburg, Lowrey, Chalmers and Muzzo
    and Ms. Huston are entitled to payment upon termination of their
    employment pursuant to their respective employment agreements.
    If any of Messrs. McEwen, Walburg, Lowrey, Chalmers or Muzzo or
    Ms. Huston were terminated for cause or if he terminates his
    employment without good reason, he will be entitled to receive
    (i) his base salary though the termination date;
    (ii) all benefits that are accrued but unpaid as of the
    termination date; and (iii) all benefits expressly
    available upon termination of employment in accordance with the
    plans and programs applicable to each
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such executive officer on the termination date. If any of
    Messrs. McEwen, Chalmers or Muzzo were terminated without
    cause or if he terminates his employment for good reason, he
    would additionally be entitled to receive an amount payable
    equal to his base salary during a
12-month
period commencing on the termination date; if Mr. Walburg
    or Ms. Huston were terminated without cause or if he or she
    terminates his or her employment for good reason, he or she
    would additionally be entitled to an amount payable equal to his
    or her base salary during a six-month period commencing on the
    termination date; and if Mr. Lowrey were terminated without
    cause or if he terminates his employment for good reason, he
    would additionally be entitled to an amount payable equal to his
    base salary during a nine-month period, in each case payable in
    equal installments in accordance with our normal payroll
    practices. Under the terms of each of their new employment
    agreements, if either of Messrs. McEwen or Walburg were
    terminated without cause or for good reason, he would
    additionally be entitled to receive a bonus or pro-rated bonus
    for the year in which the termination date fell. In addition,
    under the terms of his new employment agreement,
    Mr. Walburg would also be entitled to an amount payable
    equal to his base salary during a
12-month
period upon termination without cause or for good reason. If any
    of Messrs. McEwen, Chalmers or Muzzo or Ms. Huston is
    terminated as a result of the expiration of the term of his or
    her employment or as a result of his or her death or disability,
    he or she is entitled to receive the same payments as he would
    receive if he or she were terminated for cause. If any of
    Messrs. Walburg or Lowrey were terminated as a result of
    the expiration of the term of his employment, he would be
    entitled to receive the same payments as he would receive if he
    were terminated without cause, and if he were terminated as a
    result of death or total disability, he would be entitled to
    receive the same payments as he would receive if he were
    terminated for cause. Under the terms of each of their new
    employment agreements, if either of Messrs. McEwen or
    Walburg is terminated as a result of the expiration of the term
    of his employment or as a result of death or disability, he is
    entitled to receive the same payments as he would receive if he
    were terminated for cause.
In addition, upon the sale of more than 80% of the voting
    securities of Archipelago Learning Holdings, LLC or its
    subsidiaries or upon the sale of all or substantially all of the
    assets of Archipelago Learning Holdings, LLC or its
    subsidiaries, Mr. McEwen may be entitled to the repurchase
    of his equity incentive participation shares in an amount equal
    to $500,000 times the number of his complete years of employment
    with Archipelago Learning Holdings, LLC, such amount to be
    called the incentive gap, or a bonus equal to such incentive
    gap, in each case not to exceed $2,000,000, if at the time of
    the event, the total amount that he would receive in respect of
    these equity incentive shares would be less than $500,000
    multiplied by the total number of his complete years of
    employment by Archipelago Learning Holdings, LLC or its
    subsidiaries.
Furthermore, upon the sale of more than 80% of the voting
    securities of Archipelago Learning Holdings, LLC or upon the
    sale of all or substantially all of the assets of Archipelago
    Learning Holdings, LLC, each of Messrs. McEwen's,
    Walburg's, Lowrey's, Chalmers's, Muzzo's and
    Ms. Huston's unvested Class B shares will fully
    vest to the extent that his or her employment is not terminated
    prior to such sale or his or her employment with us is
    terminated other than for cause within 60 days prior to the
    execution of definitive and final agreements with respect to
    such sale.
All Class C shares and any unvested Class B shares
    will be forfeited if any participant is no longer our employee.
    All Class B and Class C shares will be forfeited if
    the participant's employment is terminated by us for cause
    or by the participant without good reason. In addition, all
    Class B shares and Class C shares will be forfeited
    upon a holder's breach of any covenants relating to
    non-competition, non-solicitation and non-disclosure in any
    agreement.
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The following table summarizes the potential payments to our
    named executive officers assuming that such events occurred as
    of December 31, 2008.
Equity
Severance
Benefit
Incentive
Amounts
Benefits
Continuation
Payments
Total
($)
($)
($)
($)
($)
Tim McEwen
Termination for cause or without good reason
—
—
—
—
—
Termination without cause or for good reason(1)
259,875
—
—
306,726
566,601
Termination other than for cause upon a change of
    control(2)
259,875
—
—
1,533,631
1,793,506
Change of control(3)
—
—
—
1,533,631
1,533,631
James Walburg
Termination for cause or without good reason
—
—
—
—
—
Termination without cause or for good reason(1)
107,500
—
—
49,843
157,343
Termination other than for cause upon a change of
    control(2)
107,500
—
—
295,772
403,273
Change of control(3)
—
—
—
295,772
295,772
Ray Lowrey
Termination for cause or without good reason
—
—
—
—
—
Termination without cause or for good reason(1)
240,000
—
—
—
240,000
Termination other than for cause upon a change of
    control(2)
240,000
—
—
—
240,000
Change of control(3)
—
—
—
—
—
Cameron Chalmers
Termination for cause or without good reason
—
—
—
—
—
Termination without cause or for good reason(1)
131,250
—
—
115,022
246,272
Termination other than for cause upon a change of
    control(2)
131,250
—
—
402,578
533,828
Change of control(3)
—
—
—
402,578
402,578
David Muzzo
Termination for cause or without good reason
—
—
—
—
—
Termination without cause or for good reason(1)
131,250
—
—
115,022
246,272
Termination other than for cause upon a change of
    control(2)
131,250
—
—
402,578
533,828
Change of control(3)
—
—
—
402,578
402,578
Julie Huston
Termination for cause or without good reason
—
—
—
—
—
Termination without cause or for good reason(1)
—
—
—
11,502
—
Termination other than for cause upon a change of
    control(2)
—
—
—
104,068
104,068
Change of control(3)
—
—
—
104,068
104,068
(1)
"Severance Amounts" includes the amount payable to
    each of Messrs. McEwen, Walburg, Lowrey, Chalmers and Muzzo
    pursuant to each of his agreement as of December 31, 2008.
    "Equity Incentive Payments" includes the fair value of
    each of Messrs. McEwen's, Walburg's,
    Lowrey's, Chalmers's and Muzzo's and
    Ms. Huston's vested Class B shares (which we may
    repurchase from an employee upon a termination without cause or
    for good reason) at December 31, 2008.
footnotes continued on following page
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(2) "Severance Amounts" includes the amount payable to
    each of Messrs. McEwen, Walburg, Lowrey, Chalmers and Muzzo
    pursuant to his employment agreement as of December 31,
    2008. "Equity Incentive Payments" includes the fair
    value of each of Messrs. McEwen's, Lowrey's,
    Chalmers's and Muzzo's and Ms. Huston's
    vested Class B shares (which we may repurchase from an
    employee upon a termination other than for cause upon change of
    control) at December 31, 2008 and unvested Class B
    shares (which would be accelerated upon a change of control) at
    December 31, 2008.
(3)
"Equity Incentive Payments" includes the fair value of
    each of Messrs. McEwen's, Walburg's,
    Chalmers's and Muzzo's and Ms. Huston's
    vested Class B shares (which each employee would in any
    case be entitled to) at December 31, 2008 and unvested
    Class B shares (which would be accelerated upon a change of
    control) at December 31, 2008.
Employment
    Agreements
We have entered into employment agreements with each of
    Mr. McEwen, our chief executive officer, Mr. Walburg,
    our chief financial officer, Mr. Lowrey, our chief
    technology officer, Ms. Julie Huston, our vice president of
    sales, Mr. Chalmers, our vice president, and
    Mr. Muzzo, our vice president.
Pursuant to the terms of their respective employment agreements,
    Mr. McEwen's annual base salary is $247,500,
    Mr. Walburg's annual base salary is $200,000,
    Mr. Lowrey's annual base salary is $320,000,
    Mr. Chalmers' annual base salary is $125,000,
    Mr. Muzzo's annual base salary is $125,000 and
    Ms. Huston's base salary is $155,000. Pursuant to the
    terms of each of their new employment agreements entered into in
    August 2009, Mr. McEwen's annual base salary is
    $328,000 and Mr. Walburg's annual base salary is
    $275,000. The board of managers of Archipelago Learning
    Holdings, LLC may, in its sole discretion, make any increase in
    any of Messrs. McEwen's, Walburg's,
    Lowrey's, Chalmers's or Muzzo's or Ms.
    Huston's annual base salary, as it deems appropriate. The
    board of managers of Archipelago Learning Holdings, LLC approved
    increases in base salaries for Messrs. McEwen, Walburg,
    Chalmers and Muzzo for 2008, for which their base salaries were
    $259,875, $215,000, $131,250 and $131,250, respectively. The
    board of managers of Archipelago Learning Holdings, LLC also
    approved increases in each of Messrs. McEwen's and
    Walburg's base salaries for 2009, for which their base
    salaries are $300,000 and $255,000, respectively. In addition,
    under the terms of Mr. McEwen's previous employment
    agreement, but not his new employment agreement, the board of
    managers of Archipelago Learning Holdings, LLC may consider in
    good faith an appropriate adjustment to Mr. McEwen's
    annual base salary if our Adjusted EBITDA, as determined based
    on the provisions of our credit facility as of the end of any
    fiscal year, exceeds $25.0 million. In addition, each of
    Messrs. Chalmers and Muzzo agreed that as a result of their
    reducing their working hours and taking an extended leave of
    absence beginning in or around June 2009 and ending in or around
    October 2009, as of January 10, 2009 each of their base
    salaries beginning would be $62,500, the total number of each of
    their vested Class B shares would be 365,150.4 shares
    and the total number of each of their unvested Class B
    shares would be reduced by 273,862.8 shares.
Each of Messrs. McEwen, Walburg and Lowrey are eligible to
    receive an annual performance bonus of up to 40% of his base
    salary based on performance targets established by the board of
    managers of Archipelago Learning Holdings, LLC in any particular
    fiscal year, and if such performance targets are exceeded in any
    fiscal year, the maximum bonus that each of Messrs. McEwen,
    Walburg and Lowrey are eligible to receive will be an amount
    equal to 50% of his base salary. Each of Messrs. Chalmers
    and Muzzo are eligible to receive an annual performance bonus in
    an amount equal to up to two-thirds of his base salary based on,
    among other things, performance targets established by the board
    of managers of Archipelago Learning Holdings, LLC. Ms. Huston
    and each of Messrs. McEwen and Walburg under the terms of their
    new employment agreements are eligible to receive an annual
    performance of up to 50% of his or her base salary based on
    performance targets established by our board of directors in any
    particular fiscal year; and if such performance targets are
    exceeded in any fiscal year the maximum bonus he or she is
    eligible to receive is 60% of his or her base salary. In
    addition, in 2008, Mr. Lowrey was eligible for an
    additional bonus payment of $55,000 upon achieving certain
    objectives between September 29, 2008, the day he commenced
    his employment with us, and December 31, 2008.
    Mr. Lowrey also received a signing bonus of $150,000, of
    which $75,000 was paid in the first payroll period after his
    start date and the remainder of which was paid in
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the first payroll period in January 2009. If
    Mr. Lowrey's employment is terminated for any reason
    prior to September 29, 2009, he is required to repay us the
    full $150,000. If his employment is terminated for any reason on
    or after September 29, 2009 but on or before
    September 29, 2010, he is required to repay us $75,000 of
    this signing bonus.
The employment agreements for each of Messrs. McEwen,
    Walburg, Lowrey, Chalmers and Muzzo and Ms. Huston provide that
    they are eligible to participate in our 2007 Equity Compensation
    Plan. Mr. McEwen received 2,434,335 Class B shares and
    2,434,335 Class C shares and Mr. Walburg received
    395,579 Class B Shares and 395,579 Class C shares in
    connection with their employment agreements. Mr. Lowrey
    received 552,875 Class B shares and 552,875 Class C
    shares, which represented an increase in the amounts set forth
    in his employment agreement as a result of an updated valuation
    of the shares approved by the board of managers of Archipelago
    Learning Holdings, LLC. Each of Messrs. Chalmers and Muzzo
    received 912,876 Class B shares and 912,876 Class C
    shares in connection with their employment agreements. In
    connection with the agreements relating to their leave of
    absence, Messrs. Chalmers and Muzzo each forfeited 273,638
    unvested Class B shares and retained 639,014 Class B
    shares and 912,876 Class C shares. For a description of the
    equity participation shares and vesting schedules see
    "Certain Relationships and Related Person
    Transactions — Participation Shares."
Messrs. McEwen, Walburg, Lowrey, Chalmers and Muzzo and Ms.
    Huston are entitled to certain benefits if their employment is
    terminated or upon other events. See "— Potential
    Payments Upon Termination Upon Change in Control." In
    addition, in connection with Messrs. Chalmers' and
    Muzzo's scheduled leave of absence, each of them may be
    terminated for cause if such leave of absence exceeds
    120 days.
Non-Competition
    and Non-Solicitation
The employment agreements for Messrs. McEwen, Walburg,
    Lowrey, Chalmers and Muzzo or Ms. Huston contain provisions
    relating to non-competition and non-solicitation. Pursuant to
    each of his or her employment agreements (including Messrs.
    McEwen's and Walburg's new employment agreements),
    each of Messrs. McEwen and Lowrey has agreed not to compete
    with us or solicit any of our employees for a period following
    one year of his termination, each of Mr. Walburg and Ms.
    Huston has agreed not to compete with us or solicit any of our
    employees for a period following six months of his or her
    termination, and each of Messrs. Chalmers and Muzzo has
    agreed not to compete with us or solicit any of our employees
    for a period following two years of his termination.
2009
    Omnibus Incentive Plan
We intend to adopt our 2009 Omnibus Incentive Plan, or the 2009
    Plan, in connection with this offering. The 2009 Plan will
    become effective prior to the consummation of this offering and
    a total
    of           shares
    of our common stock will be reserved for sale. The 2009 Plan
    provides for grants of nonqualified stock options, incentive
    stock options, stock appreciation rights, restricted stock,
    other stock-based awards and performance-based compensation.
    Directors, officers and other employees of us and our
    subsidiaries, as well as other individuals performing services
    for us, will be eligible for grants under the 2009 Plan. The
    purpose of the 2009 Plan is to provide incentives that will
    attract, retain and motivate highly competent officers,
    directors, employees and other service providers by providing
    them with appropriate incentives and rewards either through a
    proprietary interest in our long-term success or compensation
    based on their performance in fulfilling their personal
    responsibilities. The following is a summary of the material
    terms of the 2009 Plan, but does not include all of the
    provisions of the 2009 Plan. For further information about the
    2009 Plan, we refer you to the complete copy of the 2009 Plan,
    which we will file as an exhibit to the registration statement
    of which this prospectus is a part.
Administration
The 2009 Plan provides for its administration by the
    compensation committee of our board of directors or any
    committee designated by our board of directors to administer the
    2009 Plan. The committee is empowered to determine the form,
    amount and other terms and conditions of awards, clarify,
    construe or
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resolve any ambiguity in any provision of the 2009 Plan or any
    award agreement and adopt such rules, forms, instruments and
    guidelines for administering the 2009 Plan as it deems necessary
    or proper. All actions, interpretations and determinations by
    the committee or by our board of directors are final and binding.
Shares
    Available
The 2009 Plan makes available an aggregate
    of           shares
    of our common stock, subject to adjustments. In the event that
    any outstanding award expires, is forfeited, cancelled or
    otherwise terminated without the issuance of shares or is
    otherwise settled for cash, shares of our common stock allocable
    to such award, to the extent of such forfeiture, cancellation,
    expiration, termination or settlement for cash, shall again be
    available for the purposes of the 2009 Plan. If any award is
    exercised by tendering shares of our common stock to us, either
    as full or partial payment, in connection with the exercise of
    such award under the 2009 Plan or to satisfy our withholding
    obligation with respect to an award, only the number of shares
    of our common stock issued net of such shares tendered will be
    deemed delivered for purposes of determining the maximum number
    of shares of our common stock then available for delivery under
    the 2009 Plan.
Eligibility
    for Participation
Members of our board of directors, as well as employees of, and
    service providers to, us or any of our subsidiaries and
    affiliates are eligible to participate in the 2009 Plan. The
    selection of participants is within the sole discretion of the
    committee.
Types
    of Awards
The 2009 Plan provides for the grant of nonqualified stock
    options, incentive stock options, stock appreciation rights,
    shares of restricted stock, or "restricted stock,"
    other stock-based awards and performance-based compensation,
    collectively, the "awards." The committee will, with
    regard to each award, determine the terms and conditions of the
    award, including the number of shares subject to the award, the
    vesting terms of the award, and the purchase price for the
    award. Awards may be made in assumption of or in substitution
    for outstanding awards previously granted by us or our
    affiliates, or a company acquired by us or with which we combine.
Award
    Agreement
Awards granted under the 2009 Plan shall be evidenced by award
    agreements (which need not be identical) that provide additional
    terms and conditions associated with such awards, as determined
    by the committee in its sole discretion; provided, however, that
    in the event of any conflict between the provisions of the 2009
    Plan and any such award agreement, the provisions of the 2009
    Plan shall prevail.
Options
An option granted under the 2009 Plan will permit a participant
    to purchase from us a stated number of shares at an option price
    established by the committee, subject to the terms and
    conditions described in the 2009 Plan, and such additional terms
    and conditions, as established by the committee, in its sole
    discretion, that are consistent with the provisions of the 2009
    Plan. Options shall be designated as either a nonqualified stock
    option or an incentive stock option, provided that options
    granted to non-employee directors and other non-employee service
    providers shall be nonqualified stock options. An option granted
    as an incentive stock option shall, to the extent it fails to
    qualify as an incentive stock option, be treated as a
    nonqualified option. None of us, including any of our affiliates
    or the committee, shall be liable to any participant or to any
    other person if it is determined that an option intended to be
    an incentive stock option does not qualify as an incentive stock
    option. Each option shall conform to the requirements of the
    2009 Plan, and may contain such other provisions as the
    committee shall deem advisable.
The exercise price of an option granted under the 2009 Plan may
    not be less than 100% of the fair market value of a share of our
    common stock on the date of grant, provided the exercise price
    of an incentive stock option granted to a person holding greater
    than 10% of our voting power may not be less than 110% of
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such fair market value on such date. The committee will
    determine the term of each option at the time of grant in its
    discretion; however, the term may not exceed ten years (or, in
    the case of an incentive stock option granted to a ten percent
    stockholder, five years).
Stock
    Appreciation Rights
A stock appreciation right entitles the holder to receive, upon
    its exercise, the excess of the fair market value of a specified
    number of shares of our common stock on the date of exercise
    over the grant price of the stock appreciation right. The
    payment of the value may be in the form of cash, shares of our
    common stock, other property or any combination thereof, as the
    committee determines in its sole discretion. Subject to the
    terms of the 2009 Plan and any applicable award agreement, the
    grant price (which shall not be less than 100% of the fair
    market value of a share of our common stock on the date of
    grant), term, methods of exercise, methods of settlement, and
    any other terms and conditions of any stock appreciation right
    shall be determined by the committee. The term of a stock
    appreciation right may not exceed 10 years.
Restricted
    Stock
An award of restricted stock is a grant of a specified number of
    shares of our common stock, which are subject to forfeiture upon
    the occurrence of specified events. Each award agreement
    evidencing a restricted stock grant shall specify the period(s)
    of restriction, the number of shares of restricted stock subject
    to the award, the performance, employment or other conditions
    (including the termination of a participant's service
    whether due to death, disability or other cause) under which the
    restricted stock may be forfeited to the company and such other
    provisions as the committee shall determine. The committee may
    require that the stock certificates evidencing such shares be
    held in custody or bear restrictive legends until the
    restrictions thereon shall have lapsed. Unless otherwise
    determined by the committee and set forth in the award
    agreement, a participant holding restricted stock will not have
    the right to vote and will not receive dividends with respect to
    such restricted stock.
Other
    Stock-Based Awards
The committee, in its sole discretion, may grant awards of
    shares of our common stock and awards that are valued, in whole
    or in part, by reference to, or are otherwise based on the fair
    market value of, such shares (the "other stock-based
    awards"). Such other stock-based awards shall be in such
    form, and dependent on such conditions, as the committee shall
    determine, including, without limitation, the right to receive
    one or more shares of our common stock (or the equivalent cash
    value of such stock) upon the completion of a specified period
    of service, the occurrence of an event
and/or
the
    attainment of performance objectives. Subject to the provisions
    of the 2009 Plan, the committee shall determine to whom and when
    other stock-based awards will be made, the number of shares of
    our common stock to be awarded under (or otherwise related to)
    such other stock-based awards, whether such other stock-based
    awards shall be settled in cash, shares of our common stock or a
    combination of cash and such shares, and all other terms and
    conditions of such awards.
Performance-Based
    Compensation
To the extent permitted by Section 162(m) of the Internal
    Revenue Code, or the Code, the committee is authorized to design
    any award so that the amounts or shares payable and
    distributable thereunder are treated as "qualified
    performance-based compensation" within the meaning of
    Section 162(m) of the Code. The vesting, crediting
and/or
payment of performance-based compensation shall be based on the
    achievement of objective performance goals based on one or more
    of the following measures: (a) consolidated earnings before
    or after taxes (including earnings before interest, taxes,
    depreciation and amortization); (b) net income;
    (c) operating income; (d) earnings per share;
    (e) book value per share; (f) return on
    shareholders' equity; (g) expense management;
    (h) return on investment; (i) improvements in capital
    structure; (j) profitability of an identifiable business
    unit or product; (k) maintenance or improvement of profit
    margins; (l) stock price; (m) market share;
    (n) revenues or sales; (o) costs; (p) cash flow;
    (q) working capital; and (r) return on assets. Such
    measures may be used to measure our performance or the
    performance of any of our business units and
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may be used to compare our performance against the performance
    of a group of comparable companies, or a published index.
Transferability
Unless otherwise determined by the committee, an award shall not
    be transferable or assignable by a participant except in the
    event of his or her death (subject to the applicable laws of
    descent and distribution) and any such purported assignment,
    alienation, pledge, attachment, sale, transfer or encumbrance
    shall be void and unenforceable against us or any of our
    subsidiaries or affiliates. Any permitted transfer of the awards
    to heirs or legatees of a participant shall not be effective to
    bind us unless the committee has been furnished with written
    notice thereof and a copy of such evidence as the committee may
    deem necessary to establish the validity of the transfer and the
    acceptance by the transferee or transferees of the terms and
    conditions of the 2009 Plan.
Stockholder
    Rights
Except as otherwise provided in the applicable award agreement,
    a participant has no rights as a stockholder with respect to
    shares of our common stock covered by any award until the
    participant becomes the record holder of such shares.
Adjustment
    of Awards
In the event of any corporate event or transaction such as a
    merger, consolidation, reorganization, recapitalization,
    separation, stock dividend, stock split, reverse stock split,
    split up, spin-off, combination of shares of our common stock,
    exchange of shares of our common stock, dividend in kind,
    extraordinary cash dividend, or other like change in capital
    structure (other than normal cash dividends) to our
    stockholders, or any similar corporate event or transaction, the
    committee, to prevent dilution or enlargement of
    participants' rights under the 2009 Plan, shall substitute
    or adjust, in its sole discretion, the number and kind of shares
    that may be issued under the 2009 Plan or under particular forms
    of awards, the number and kind of shares subject to outstanding
    awards, the option price, grant price or purchase price
    applicable to outstanding awards, the annual award limits,
and/or
other
    value determinations applicable to the 2009 Plan or outstanding
    awards.
Upon the occurrence of a change in control, unless otherwise
    specifically prohibited under applicable laws or by the rules
    and regulations of any governing governmental agencies or
    national securities exchanges, or unless the committee shall
    determine otherwise in the award agreement, the committee is
    authorized (but not obligated) to make adjustments in the terms
    and conditions of outstanding awards, including without
    limitation the following (or any combination thereof):
    (i) continuation or assumption of such outstanding awards
    under the 2009 Plan by us (if it is the surviving company or
    corporation) or by the surviving company or corporation or its
    parent; (ii) substitution by the surviving company or
    corporation or its parent of awards with substantially the same
    terms for such outstanding awards; (iii) accelerated
    exercisability, vesting
and/or
lapse
    of restrictions under all then outstanding awards immediately
    prior to the occurrence of such event; (iv) upon written
    notice, provide that any outstanding awards must be exercised,
    to the extent then exercisable, within fifteen days immediately
    prior to the scheduled consummation of the event, or such other
    period as determined by the committee (in either case contingent
    upon the consummation of the event), and at the end of such
    period, such awards shall terminate to the extent not so
    exercised within the relevant period; and (v) cancellation
    of all or any portion of outstanding awards for fair value (as
    determined in the sole discretion of the committee) which, in
    the case of options and stock appreciation rights, may equal the
    excess, if any, of the value of the consideration to be paid in
    the change of control transaction to holders of the same number
    of shares subject to such options or stock appreciation rights
    (or, if no such consideration is paid, fair market value of the
    shares subject to such outstanding awards or portion thereof
    being canceled) over the aggregate option price or grant price,
    as applicable, with respect to such awards or portion thereof
    being canceled.
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Amendment
    and Termination
Our board of directors may amend, alter, suspend, discontinue,
    or terminate the 2009 Plan or any portion thereof or any award
    (or award agreement) thereunder at any time.
Compliance
    with Code Section 409A
To the extent that the 2009 Plan
and/or
awards are subject to Section 409A of the
    U.S. Internal Revenue Code, or the Code, the committee may,
    in its sole discretion and without a participant's prior
    consent, amend the 2009 Plan
and/or
awards, adopt policies and procedures, or take any other actions
    (including amendments, policies, procedures and actions with
    retroactive effect) as are necessary or appropriate to
    (a) exempt the 2009 Plan
and/or
any
    award from the application of Section 409A of the Code,
    (b) preserve the intended tax treatment of any such award,
    or (c) comply with the requirements of Section 409A of
    the Code, Department of Treasury regulations and other
    interpretive guidance issued thereunder, including without
    limitation any such regulations or other guidance that may be
    issued after the date of the grant. This plan shall be
    interpreted at all times in such a manner that the terms and
    provisions of the 2009 Plan and awards are exempt from or comply
    with Section 409A guidance.
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CERTAIN
    RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Holdings
    LLC Agreement
On June 30, 2008, investment funds affiliated with
    Providence Equity Partners, together with Cameron Chalmers and
    David Muzzo (our founders and vice presidents) MHT-SI, L.P. and
    Jeanne Bodnar, the founder of TeacherWeb, together constituting
    all of the members of Archipelago Learning Holdings, LLC
    (formerly known as Study Island Holdings, LLC), entered into a
    second amended and restated limited liability company agreement,
    or the Holdings LLC Agreement, which governs its operations.
    Immediately prior to the consummation of this offering,
    Archipelago Learning, Inc., a newly formed Delaware corporation,
    will consummate the Corporate Reorganization whereby Archipelago
    Learning Holdings, LLC will become a wholly owned subsidiary of
    Archipelago Learning, Inc. The Holdings LLC Agreement in an
    amended form will continue to govern the operations of
    Archipelago Learning Holdings, LLC. See "Corporate
    Reorganization."
Archipelago Learning Holdings, LLC created a board of managers
    of seven persons to manage the company and its business affairs.
    Of the seven managers, four are appointed by Providence Equity
    Partners, two are our founders, Cameron Chalmers and David
    Muzzo, and one is the current chief executive officer, Tim
    McEwen.
The Holdings LLC Agreement sets forth the rights of the
    Class A,
A-2,
B and C
    shareholders and the vesting and forfeiture provisions of the
    Class B and C shares. Holders of Class A and
Class A-2 shares
vote as a single class, with each holder of Class A or
Class A-2 shares
entitled to one vote per share that it owns. Holders of
    Class B and Class C shares are not entitled to vote
    their shares. The Class B shares of Archipelago Learning
    Holdings, LLC vest ratably over five years. Holders of
    Class C shares are entitled to distributions after holders
    of Class A and
Class A-2 shares
receive certain threshold multiples of cash-based returns on
    their respective Class A and
Class A-2 shares,
subject to such Class C share holders' continued
    employment by us. Both of the Class B and Class C
    shares are granted under an equity incentive plan. For a more
    detailed description of the Class B and Class C
    shares, see "— Participation Shares." The
    Class A,
A-2,
B, and
    C shares will be exchanged for shares of the common stock,
    shares of restricted common stock and restricted stock unit
    awards of Archipelago Learning, Inc. in connection with the
    Corporate Reorganization. See "Corporate
    Reorganization."
Archipelago Learning Holdings, LLC may make distributions to its
    members in accordance with the terms of the Holdings LLC
    Agreement in the sole discretion of the board of managers. For a
    description of distributions made, see
    "— Archipelago Learning Holdings LLC
    Distributions."
The Holdings LLC Agreement includes indemnification provisions
    by Archipelago Learning Holdings, LLC in favor of the board of
    managers, each current and former manager and any of their
    respective affiliates.
Archipelago
    Learning Holdings, LLC Distributions
Archipelago Learning Holdings, LLC paid aggregate distributions
    to its equity holders of $74.8 million and
    $0.8 million in the year end December 31, 2007 and the
    six months ended June 30, 2009, respectively. These
    distributions were made in connection with the Providence Equity
    Transactions and to enable equity holders to meet their
    estimated tax obligations, and they include a $73.2 million
    distribution made in November 2007 with the proceeds of the term
    loan and cash on hand. See "Management's Discussion
    and Analysis of Financial Condition and Results of
    Operations." The board of managers of Archipelago Learning
    Holdings, LLC approved a special distribution of approximately
    $8.0 million to its equity holders to be made in the third
    quarter of 2009. In addition, Archipelago Learning Holdings, LLC
    intends to make a distribution of approximately
    $1.4 million to its equity holders to enable them to meet
    their estimated tax obligations for the period from
    January 1, 2009 to the date of the Corporate
    Reorganization. The amount of this distribution will be based on
    Archipelago Learning Holdings, LLC's estimated net taxable
    income from January 1, 2009 to the date of the Corporate
    Reorganization. Investors in this offering will not receive this
    distribution.
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Participation
    Shares
In connection with the Providence Equity Transactions, we
    adopted the 2007 Equity Incentive Plan, under which we granted
    Class B and Class C shares of Archipelago Learning
    Holdings, LLC to our executive officers and certain of our
    employees as equity incentive compensation. The Class B and
    Class C shares are awarded under the plan without any
    up-front cost to a participant through a participation
    agreement. The Class B shares are time-vesting shares that
    vest ratably over five years subject to a participant's
    continued employment with or service to the company. Holders of
    Class C shares are entitled to distributions after holders
    of Class A and
Class A-2 shares
receive certain threshold multiples of cash-based returns on
    their respective Class A and Class A-2 shares, subject
    to such Class C share holders' continued employment by
    or service to us. All Class C shares and any unvested
    Class B shares will be forfeited if any participant is no
    longer our employee. All Class B and Class C shares
    will be forfeited if the participant's employment is
    terminated by us for cause or by the participant without good
    reason. In addition, all Class B shares and Class C
    shares will be forfeited upon a holder's breach of any
    covenants relating to non-competition, non-solicitation or
    non-disclosure in any agreement. Furthermore, upon the sale of
    more than 80% of the voting securities of Archipelago Learning
    Holdings, LLC or upon the sale of all or substantially all of
    the assets of Archipelago Learning Holdings, LLC, holders of
    unvested Class B shares will fully vest to the extent that
    his or her employment is not terminated prior to such sale or
    his or her employment with us is terminated other than for cause
    within 60 days prior to the execution of definitive and
    final agreements with respect to such sale.
Upon the consummation with this offering and in connection with
    the Corporate Reorganization, holders of the Class B and
    Class C shares will receive common stock, restricted stock
    and restricted stock unit awards in exchange for their
    Class B and Class C shares. See "Corporate
    Reorganization."
The following table sets forth the number and class of shares of
    Archipelago Learning Holdings, LLC received by each named
    executive officer as of September 2, 2009 and the number of
    shares of common stock, restricted common stock and restricted
    stock unit awards for which they will exchange their shares of
    Archipelago Learning Holdings, LLC in connection with the
    Corporate Reorganization:
Number of Shares
Number of Shares of
of Restricted
Number of Restricted
Class B Shares
Class C Shares
Common Stock
Common Stock
Stock Unit Awards
Timothy McEwen
2,434,335
2,434,335
Cameron Chalmers
639,014
912,876
David Muzzo
639,014
912,876
Ray Lowrey
552,875
552,875
James Walburg
486,876
486,876
Julie Huston
182,576
182,576
Stockholders
    Agreement
Upon the completion of this offering, we intend to enter into a
    stockholders agreement with our existing principal stockholders,
    which include Providence Equity Partners, Cameron Chalmers,
    David Muzzo and MHT-SI, L.P. The stockholders agreement will set
    forth certain terms relating to the rights of our principal
    stockholders and restrictions on transfers of shares of our
    common stock.
Registration
    Rights Agreement
Upon the completion of this offering and in connection with the
    Corporate Reorganization, we intend to enter into a registration
    rights agreement with our principal shareholders, which include
    Providence Equity Partners, Cameron Chalmers, David Muzzo and
    MHT-SI L.P., providing for customary registration rights,
    including demand, short-form and piggyback registration rights
    of the common stock they will receive as a result of the
    Corporate Reorganization.
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Restricted
    Stock and Restricted Stock Unit Awards
Upon the Corporate Reorganization, we intend to issue restricted
    common stock and restricted stock unit awards in exchange of the
    unvested Class B shares and the Class C shares.
Corporate
    Reorganization
Prior to this offering, we conducted our business through
    Archipelago Learning Holdings, LLC and its subsidiaries.
    Immediately prior to the consummation of this offering,
    Archipelago Learning, Inc., a newly formed Delaware corporation,
    will directly and indirectly, acquire all of the equity
    interests, of Archipelago Learning Holdings, LLC in exchange for
    shares of common stock and shares of restricted stock of
    Archipelago Learning, Inc. See "Corporate
    Reorganization."
MHT-Securities,
    L.P. Agreements
On May 1, 2007, Archipelago Learning, LLC entered into an
    agreement with MHT Securities, L.P. for the provision of
    financial advice in connection with the identification,
    evaluation and acquisition of one or more businesses. MHT
    Securities, L.P. is an affiliate of MHT-SI, L.P. one of the
    shareholders of Archipelago Learning Holdings, LLC. Under the
    terms of the agreement, Archipelago Learning, LLC must pay a
    transaction fee to MHT Securities, L.P. upon the successful
    consummation of a merger, acquisition, consolidation, divesture
    or similar transaction with any company initially identified and
    contacted by MHT Securities, L.P. as a potential acquisition for
    Archipelago Learning, LLC. The amount of this transaction fee is
    dependent upon the size of the acquisition, but in no
    circumstances less than $250,000. Archipelago Learning, LLC is
    also responsible for reimbursing MHT Securities, L.P. for any
    reasonable expenses incurred in connection with this agreement.
    During 2008, we paid approximately $277,000 to MHT Securities,
    L.P., consisting of $250,000 in connection with our acquisition
    of TeacherWeb, and $27,000 in expenses.
Agreement
    with CDW Corporation
We buy information technology and services from CDW Corporation,
    a portfolio company of Providence Equity Partners, the majority
    shareholder of Archipelago Learning Holdings, LLC. Although we
    do not have any long-term contracts or purchase agreements
    outstanding with CDW, we purchased approximately $344,000 and
    $178,000 of information technology and services from CDW in 2008
    and the six months ended June 30, 2009, respectively.
Edline
    Investment
In August 2009, in conjunction with Providence Equity
    Partner's acquisition of Edline, a private Chicago-based
    educational technology company, we made a strategic minority
    investment in Edline. We purchased 285,601 Series A shares
    of Edline for $2.9 million, representing 7.1% of
    Edline's outstanding Series A shares. In addition,
    Edline borrowed $2.1 million from us pursuant to a
    five-year promissory note, which bears interest at 9.5% per
    annum and requires semi-annual interest-only payments. In
    connection with these transactions, we received transaction fees
    of $0.2 million. Edline provides online Learning Community
    Management Systems, or LCMS, solutions that help schools improve
    student performance by harnessing the power of parental
    involvement, supporting teachers, and engaging the learning
    community. Services include web hosting, content management,
    information portals, tools for classroom management, gradebook,
    notification, student data analytics, virtual storage and
    related technologies.
We believe that we can benefit from strategic opportunities with
    Edline, as Edline is capitalizing on the same trends in the K-12
    education market as Study Island and TeacherWeb: (1) an
    increased focus on higher academic achievement and
    (2) increased availability and utilization of web-based
    technologies to enhance and supplement instruction and improve
    school to home communications. Accordingly, there are attractive
    strategic partnership opportunities between Archipelago Learning
    and Edline, including: (1) linking Study Island's
    content to Edline's school and district LCMS solutions;
    (2) co-marketing arrangements to capitalize on each
    company's customer base and sales force; and,
    (3) linking
and/or
sharing of web application functionality between Edline and
    TeacherWeb.
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Board
    Compensation
Upon consummation of this offering, directors who are our
    employees or employees of our subsidiaries or employees of
    Providence Equity Partners will receive no compensation for
    their service as members of either our board of directors or
    board committees.
    On          ,
    our board of directors approved a plan for annual compensation
    for our non-employee directors, effective as of the date of the
    consummation of this offering. The non-employee directors will
    receive an annual retainer of $     
    and a fee of $      for each meeting
    they attend. The annual retainer will be payable at the
    director's option either 100% in cash or 100% in shares of
    our common stock. In addition, our non-employee directors will
    receive an annual restricted share award with a grant date fair
    market value of $     , which will vest
    on the      anniversary of the
    grant date. The non-management chair of the audit committee will
    receive an additional $     fee payable
    at his or her option either 100% in cash or 100% in shares of
    our common stock. No separate committee meeting fees will be
    paid.
All directors are reimbursed for reasonable travel and lodging
    expenses incurred by them in connection with attending board and
    committee meetings.
Employment
    Agreements
We have entered into employment agreements with each of
    Messrs. McEwen, Walburg, Lowrey, Chalmers, Muzzo and
    Ms. Huston. For more information regarding these
    agreements, see "Compensation Discussion and
    Analysis — Employment Agreements" and
    "Compensation Discussion and
    Analysis — Potential Payments Upon Termination or
    Change of Control."
Indemnification
    Agreements
We intend to enter into indemnification agreements with each of
    our directors and executive officers. These agreements, among
    other things, require us to indemnify each director and
    executive officer to the fullest extent permitted by Delaware
    law, including indemnification of expenses such as
    attorneys' fees, judgments, fines and settlement amounts
    incurred by the director or executive officer in any action or
    proceeding, including any action or proceeding by or in right of
    us, arising out of the person's services as a director or
    executive officer.
Policies
    for Approval of Related Person Transactions
In connection with this offering, we will adopt a written policy
    relating to the approval of related person transactions. Our
    audit committee will review and approve or ratify all
    relationships and related person transactions between us and
    (i) our directors, director nominees, executive officers or
    their immediate family members, (ii) any 5% record or
    beneficial owner of our common stock or (iii) any immediate
    family member of any person specified in (i) and
    (ii) above. Our controller will be primarily responsible
    for the development and implementation of processes and controls
    to obtain information from our directors and executive officers
    with respect to related party transactions and for determining,
    based on the facts and circumstances, whether we or a related
    person have a direct or indirect material interest in the
    transaction.
As set forth in the related person transaction policy, in the
    course of its review and approval or ratification of a related
    party transaction, the committee will consider:
•
the nature of the related person's interest in the
    transaction;
•
the availability of other sources of comparable products or
    services;
•
the material terms of the transaction, including, without
    limitation, the amount and type of transaction; and
•
the importance of the transaction to us.
Any member of the audit committee who is a related person with
    respect to a transaction under review will not be permitted to
    participate in the discussions or approval or ratification of
    the transaction. However, such member of the audit committee
    will provide all material information concerning the transaction
    to the audit committee.
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PRINCIPAL
    AND SELLING STOCKHOLDERS
The following table shows information regarding the beneficial
    ownership of our common stock (i) immediately prior to and
    (ii) as adjusted to give effect to this offering by:
•
each person or group who is known by us to own beneficially more
    than 5% of our common stock;
•
each member of our board of directors and each of our named
    executive officers;
•
all members of our board of directors and our named executive
    officers as a group; and
•
each of the selling stockholders.
For more information on selling stockholders, see "Certain
    Relationships and Related Person Transactions."
Beneficial ownership of shares is determined under rules of the
    SEC and generally includes any shares over which a person
    exercises sole or shared voting or investment power. Except as
    noted by footnote, and subject to community property laws where
    applicable, we believe based on the information provided to us
    that the persons and entities named in the table below have sole
    voting and investment power with respect to all shares of our
    common stock shown as beneficially owned by them. Percentage of
    beneficial ownership is based
    on           shares
    of common stock outstanding as
    of          ,
    2009 after giving effect to our Corporate Reorganization and
    assuming an initial public offering price of
    $      per share (the midpoint of the
    price range set forth on the cover of this prospectus), shares
    of common stock to be outstanding after the completion of this
    offering, assuming no exercise of the over-allotment option,
    or           shares,
    assuming full exercise of the over-allotment option. Except as
    otherwise indicated, the persons named in the table below have
    sole voting and investment power with respect to all shares of
    capital stock held by them. Unless otherwise indicated, the
    address for each holder listed below is Archipelago Learning,
    Inc., 3400 Carlisle Street, Suite 345, Dallas, Texas 75204.
Shares Beneficially Owned After
this Offering
Assuming Full
Exercise of the
Shares Beneficially Owned
Shares Beneficially Owned
Option to Purchase
Before this Offering
After this Offering(1)
Additional Shares
Number
Percentage
Shares
Number
Number
Name and Address
of Shares
of Shares
Offered(2)
of Shares
Percentage
of Shares
Percentage
Providence Equity Partners V L.P.(3)
MHT-SI L.P.(4)
Timothy McEwen
James Walburg
Ray Lowrey
Julie Huston
Cameron Chalmers
David Muzzo
David Phillips(5)
Michael Powell
Peter Wilde(5)
All board of director members and named executive officers as a
    group (      persons)
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footnotes on following page
*
Represents beneficial ownership less than 1% of our outstanding
    common stock.
(1)
Beneficial ownership does not include any shares that may be
    purchased in this offering. See "Underwriting."
(2)
Represents the number of shares of common stock of Archipelago
    Learning, Inc. to be offered after giving effect to the
    Corporate Reorganization. If the underwriters exercise their
    option to purchase additional shares of our common stock, the
    additional shares sold by the selling stockholders will be
    allocated as follows:     .
(3)
The address of Providence Equity Partners V L.P. and Providence
    Equity Partners V-A Study Island, LP is 50 Kennedy Plaza,
    Suite 1801, Providence, Rhode Island, 02903.
(4)
The address of MHT-SI, L.P. is 2000 McKinney Avenue,
    Suite 1200, Dallas, Texas, 75201.
(5)
Does not include shares held by Providence Equity Partners V
    L.P. and its affiliated entities. By virtue of their
    affiliations with Providence Equity Partners, each of
    Messrs. Phillips and Wilde may be deemed to have or share
    beneficial ownership of shares held by Providence Equity
    Partners V L.P. and its affiliated entities. Each of
    Messrs. Phillips and Wilde disclaims beneficial ownership
    of such shares, except to the extent of his pecuniary interest
    therein.
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DESCRIPTION
    OF CAPITAL STOCK
The following is a description of the material terms of our
    certificate of incorporation and bylaws as they will be in
    effect following the Corporate Reorganization and immediately
    prior to the consummation of this offering. This summary does
    not purport to be complete and is qualified in its entirety by
    reference to the actual terms and provisions of our certificate
    of incorporation and bylaws, copies of which will be filed as
    exhibits to the registration statement of which this prospectus
    is a part.
Authorized
    Capitalization
Upon the completion of the Corporate Reorganization immediately
    prior to the consummation of this offering, our authorized
    capital stock will consist
    of           shares
    of common stock, par value $0.001 per share,
    and           shares
    of preferred stock, par value $     
    per share. Immediately following the completion of this
    offering,           shares
    of common stock,
    or           shares
    if the underwriters exercise their option to purchase additional
    shares in full, will be outstanding, and there will be no
    outstanding shares of preferred stock.
Common
    Stock
The holders of our common stock are entitled to the following
    rights.
Voting
    Rights
Each share of common stock entitles the holder to one vote with
    respect to each matter presented to our stockholders on which
    the holders of common stock are entitled to vote. Our common
    stock votes as a single class on all matters relating to the
    election and removal of directors on our board of directors and
    as provided by law, with each share of common stock entitling
    its holder to one vote. Holders of our common stock will not
    have cumulative voting rights. Except as otherwise provided in
    our certificate of incorporation or required by law, all matters
    to be voted on by our stockholders must be approved by a
    majority of the shares present in person or by proxy at the
    meeting and entitled to vote on the subject matter.
Dividend
    Rights
Holders of common stock will share equally in any dividend
    declared by our board of directors, subject to any preferential
    rights of the holders of any outstanding preferred stock.
Liquidation
    Rights
In the event of any voluntary or involuntary liquidation,
    dissolution or winding up of our affairs, holders of our common
    stock would be entitled to share ratably in our assets that are
    legally available for distribution to stockholders after payment
    of liabilities. If we have any preferred stock outstanding at
    such time, holders of the preferred stock may be entitled to
    distribution
and/or
liquidation preferences. In either such case, we must pay the
    applicable distribution to the holders of our preferred stock
    before we may pay distributions to the holders of our common
    stock.
Other
    Rights
Our stockholders have no subscription, redemption or conversion
    privileges. Our common stock does not entitle its holders to
    preemptive rights for additional shares and does not have any
    sinking fund provisions. All of the outstanding shares of our
    common stock are fully paid and nonassessable. The rights,
    preferences and privileges of the holders of our common stock
    are subject to the rights of the holders of shares of any series
    of preferred stock which we may issue.
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Registration
    Rights
Our existing shareholders have certain registration rights with
    respect to our common stock pursuant to a registration rights
    agreement. For further information regarding this agreement, see
    "Certain Relationships and Related Person
    Transactions" and "Shares Eligible for Future
    Sale."
Preferred
    Stock
Our board of directors is authorized to provide for the issuance
    of preferred stock in one or more series and to fix the
    preferences, powers and relative, participating, optional or
    other special rights, and qualifications, limitations or
    restrictions thereof, including the dividend rate, conversion
    rights, voting rights, redemption rights and liquidation
    preference and to fix the number of shares to be included in any
    such series without any further vote or action by our
    stockholders. Any preferred stock so issued may rank senior to
    our common stock with respect to the payment of dividends or
    amounts upon liquidation, dissolution or winding up, or both. In
    addition, any such shares of preferred stock may have class or
    series voting rights. The issuance of preferred stock may have
    the effect of delaying, deferring or preventing a change in
    control of our company without further action by the
    shareholders and may adversely affect the voting and other
    rights of the holders of our common stock.
Anti-Takeover
    Effects of the Delaware General Corporate Law and Our
    Certificate of Incorporation and Bylaws
Upon the closing of this offering, our certificate of
    incorporation and bylaws will contain provisions that may delay,
    defer or discourage another party from acquiring control of us.
    We expect that these provisions, which are summarized below,
    will discourage coercive takeover practices or inadequate
    takeover bids. These provisions are also designed to encourage
    persons seeking to acquire control of us to first negotiate with
    our board of directors, which we believe may result in an
    improvement of the terms of any such acquisition in favor of our
    stockholders. However, they also give our board the power to
    discourage acquisitions that some stockholders may favor.
Section 203
    of the Delaware General Corporate Law
Upon the closing of this offering, we will be subject to the
    provisions of Section 203 of the Delaware General
    Corporation Law. In general, Section 203 prohibits a
    publicly held Delaware corporation from engaging in a
    "business combination" with an "interested
    stockholder" for a three-year period following the time
    that this stockholder becomes an interested stockholder, unless
    the business combination is approved in a prescribed manner. A
    "business combination" includes, among other things, a
    merger, asset or stock sale or other transaction resulting in a
    financial benefit to the interested stockholder. An
    "interested stockholder" is a person who owns 15% or
    more of the corporation's outstanding stock, or an
    affiliate or associate of the corporation who did own 15% or
    more of the corporation's voting stock within three years
    prior to the determination of interested stockholder status.
    Under Section 203, a business combination between a
    corporation and an interested stockholder is prohibited unless
    it satisfies one of the following conditions:
•
before the stockholder became interested, the board of directors
    approved either the business combination or the transaction that
    resulted in the stockholder becoming an interested stockholder;
•
upon consummation of the transaction which resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding for purposes of determining the voting stock
    outstanding, shares owned by persons who are directors and also
    officers, and employee stock plans, in some instances; or
•
at or after the time the stockholder became interested, the
    business combination was approved by the board of directors of
    the corporation and authorized at an annual or special meeting
    of
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the stockholders by the affirmative vote of at least two-thirds
    of the outstanding voting stock which is not owned by the
    interested stockholder.
A Delaware corporation may opt out of Section 203 either
    with an express provision in its original certificate of
    incorporation or in an amendment to its certificate of
    incorporation or bylaws approved by its stockholders. However,
    we have not opted out, and do not currently intend to opt out,
    of this provision. The statute could prohibit or delay mergers
    or other takeover or change in control attempts and,
    accordingly, may discourage attempts to acquire us.
Certificate
    of Incorporation and Bylaw Provisions
Board Composition and Filling Vacancies.
Our
    bylaws will provide that directors may be removed only for cause
    by the affirmative vote of the holders of a majority of the
    voting power of the outstanding shares of common stock entitled
    to vote. Furthermore, any vacancy on our board of directors,
    however occurring, including a vacancy resulting from an
    increase in the size of our board, may only be filled by the
    affirmative vote of a majority of our directors then in office
    even if less than a quorum.
No Stockholder Action by Written Consent.
Our
    certificate of incorporation will provide that, subject to the
    rights of any holders of preferred stock to act by written
    consent instead of a meeting, stockholder action may be taken
    only at an annual meeting or special meeting of stockholders and
    may not be taken by written consent instead of a meeting, unless
    the action to be taken by written consent of stockholders and
    the taking of this action by written consent has been expressly
    approved in advance by the board of directors. Failure to
    satisfy any of the requirements for a stockholder meeting could
    delay, prevent or invalidate stockholder action.
Meetings of Stockholders
.  Our bylaws will
    provide that only a majority of the members of our board of
    directors then in office or the Chief Executive Officer may call
    special meetings of the stockholders and only those matters set
    forth in the notice of the special meeting may be considered or
    acted upon at a special meeting of stockholders. Our bylaws will
    limit the business that may be conducted at an annual meeting of
    stockholders to those matters properly brought before the
    meeting.
Advance Notice Requirements.
Our bylaws will
    establish an advance notice procedure for stockholders to make
    nominations of candidates for election as directors or to bring
    other business before an annual meeting of our stockholders. The
    bylaws will provide that any stockholder wishing to nominate
    persons for election as directors at, or bring other business
    before, an annual meeting must deliver to our secretary a
    written notice of the stockholder's intention to do so. To
    be timely, the stockholder's notice must be delivered to or
    mailed and received by us not later than the 60th day nor
    earlier than the 90th day prior to the anniversary date of
    the preceding annual meeting, except that if the annual meeting
    is changed by more than 30 days from the date contemplated
    at the time of the previous year's proxy statement, we must
    receive the notice not earlier than the 90th day prior to
    such annual meeting and not later than the 60th day prior
    to such annual meeting. If a public announcement of the date of
    such annual meeting is made fewer than 70 days prior to the
    date of such annual meeting, then notice must be received by us
    no later than the tenth day following the public announcement of
    the date of the meeting. The notice must include the information
    specified in the bylaws.
Amendment to Bylaws and Certificate of
    Incorporation.
As required by Delaware law, any
    amendment to our certificate of incorporation must first be
    approved by a majority of our board of directors and, if
    required by law or our certificate of incorporation, thereafter
    be approved by a majority of the outstanding shares entitled to
    vote on the amendment. Our bylaws may be amended by the
    affirmative vote of a majority of the directors then in office,
    subject to any limitations set forth in the bylaws, without
    further stockholder action.
Blank Check Preferred Stock.
The board of
    directors may authorize the issuance of preferred stock with
    voting or conversion rights that could adversely affect the
    voting power or other rights of the holders of the common stock.
    Issuing preferred stock provides flexibility in connection with
    possible acquisitions and other corporate purposes, but could
    also, among other things, have the effect of delaying, deferring
    or
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preventing a change in control of our company and may adversely
    affect the market price of our common stock and the voting and
    other rights of the holders of common stock.
Listing
We intend to apply to have our common stock listed on the NYSE
    or Nasdaq under the symbol "ARCL."
Transfer
    Agent and Registrar
The transfer agent and registrar for our common stock
    is          .
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DESCRIPTION
    OF MATERIAL INDEBTEDNESS
On November 16, 2007, Archipelago Learning, LLC, formerly
    known as Study Island, LLC, as borrower, and the other persons
    designated as credit parties from time to time, entered into a
    credit facility providing for a $70.0 million term loan and
    a $10.0 million revolving credit facility with General
    Electric Capital Corporation, as a lender and as agent for all
    lenders, NewStar Financial, Inc., as syndication agent, the
    other parties thereto as lenders and GE Capital Markets, Inc.
    and NewStar Financial, Inc., as joint lead arrangers and joint
    bookrunners. This summary is not a complete description of all
    of the terms of the agreements governing our credit facility.
    The agreements setting forth the principal terms and conditions
    of our credit facility are filed as exhibits to the registration
    statement of which this prospectus forms a part.
In May 2009 the credit agreement governing the credit facility
    was amended to permit the creation of AL Midco, LLC, or
    AL Midco, a new wholly owned subsidiary of Archipelago
    Learning Holdings, LLC, which assumed all of Archipelago
    Learning Holdings, LLC's interests in Archipelago Learning,
    LLC. AL Midco became a guarantor under the credit agreement
    and Archipelago Learning Holdings, LLC was released as guarantor.
General
Our credit facility consists of a $70.0 million term loan
    (of which $68.4 million was outstanding as of June 30,
    2009), which expires in November 2013, and a $10.0 million
    revolving credit facility, none of which was outstanding at
    June 30, 2009, which expires in November 2013.
The obligations under the credit facility are guaranteed by
    AL Midco and TeacherWeb. The credit facility is secured on
    a first-priority basis by security interests (subject to
    permitted liens) in substantially all tangible and intangible
    assets, subject to certain exceptions, owned by Archipelago
    Learning, LLC, AL Midco and TeacherWeb, including pledges
    of the stock of Archipelago Learning, LLC's,
    AL Midco's and TeacherWeb's subsidiaries. In
    addition, any future domestic subsidiaries of Archipelago
    Learning, LLC, AL Midco and TeacherWeb will be required
    (subject to certain exceptions) to guarantee the credit facility
    and grant liens on substantially all of its assets to secure
    such guarantee.
Interest
    and Fees
The term loan bears interest at rates based upon either a base
    rate or LIBOR plus an applicable margin determined based on our
    leverage ratio (3.25% as of June 30, 2009, 3.25% as of
    December 31, 2008, and 4.00% as of December 31, 2007,
    respectively, in each case for a LIBOR-based term loan). Amounts
    under the revolving credit facility can be borrowed and repaid,
    from time to time, at our option, subject to pro forma
    compliance with certain financial covenants. We incurred
    $1.7 million of debt financing costs in association with
    the term loan and revolving credit facility during 2007. In
    2008, we received a refund of a portion of such costs in the
    amount of $0.2 million.
As of June 30, 2009, $68.4 million of borrowings were
    outstanding under the term loan and $0 were outstanding under
    the revolving credit facility. As of December 31, 2008,
    $69.3 million and $0 million of borrowings were
    outstanding under the term loan and the revolving credit
    facility, respectively. For the year ended December 31,
    2008 and for the six months ended June 30, 2009, the
    weighted average interest rate under the term loan was 7.03% and
    3.76%, respectively, before giving effect to the interest rate
    swap. The rate on our interest rate swap is the difference
    between our fixed rate of 4.035% and the floating rate of
    three-month LIBOR.
In addition to paying interest on outstanding principal under
    the credit facility, we are also required to pay a commitment
    fee (0.50% as of June 30, 2009) on the average daily
    unused commitments available to be drawn under the revolving
    credit facility at a rate determined based on our leverage
    ratio. Our leverage ratio was 2.61 to 1 as of June 30,
    2009. We are also required to pay letter of credit fees, with
    respect to each letter of credit issued, at a rate per annum
    equal to the applicable margin for LIBOR revolving credit loans
    on the average daily amount of undrawn letters of credit minus
    the amount of fronting fee referred to below. We are also
    required to pay fronting fees, with respect to each letter of
    credit issued, at a rate of 0.125% per annum
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and to pay General Electric Capital Corporation certain
    administrative fees from time to time, in its role as
    administrative agent. Under certain circumstances, we may be
    required to reimburse the lenders under our credit facility for
    certain increased fees and expenses caused by a change
    of law.
Prepayments
We have the right to optionally prepay our borrowings under the
    term loan or the revolving credit facility, subject to the
    procedures set forth in the credit facility. We may be required
    to make prepayments on our borrowings under the term loan or the
    revolving credit facility if we receive proceeds as a result of
    certain asset sales, debt issuances, events of loss or if we
    have excess cash flow (as defined in the credit facility).
Covenants
The credit facility requires us to maintain certain financial
    ratios, including a leverage ratio (based on the ratio of
    consolidated indebtedness, net of cash and cash equivalents
    subject to control agreements, to consolidated EBITDA, defined
    in the credit facility as earnings before interest, taxes,
    depreciation, derivative losses, changes in deferred revenue,
    stock based compensation, certain investments and permitted
    acquisition expenses, certain permitted payments to Providence
    Equity Partners, unusual non-recurring charges, certain agency
    fees to the administrative agent and adjustments related to the
    acquisition of TeacherWeb, or Adjusted EBITDA), an interest
    coverage ratio (based on the ratio of Adjusted EBITDA to
    consolidated interest expense, as defined in the credit
    facility) and a fixed charge coverage ratio (based on the ratio
    of Adjusted EBITDA to fixed charges, as defined in the credit
    facility). Based on the formulations set forth in the credit
    facility, as of June 30, 2009, we were required to maintain
    a maximum leverage ratio of 4.50 to 1.00, a minimum interest
    coverage ratio of 2.10 to 1.00 and a minimum fixed charge
    coverage ratio of 1.40 to 1.00. As of June 30, 2009, our
    leverage ratio was 2.61 to 1.00, our interest coverage ratio was
    5.45 to 1.00 and our fixed charge coverage ratio was 3.65 to
    1.00. The financial ratios we are required to maintain become
    more restrictive over time.
The credit facility also contains certain affirmative and
    restrictive covenants that, among other things, provide
    limitations on the incurrence of additional indebtedness, liens
    on property, sale and leaseback transactions, investments, loans
    and advances, merger or consolidation, asset sales,
    acquisitions, dividends, transactions with affiliates,
    prepayments of any other indebtedness, modifications of our
    organizational documents and restrictions on our subsidiaries.
    The credit facility contains events of default that are
    customary for similar facilities and transactions, including a
    cross-default provision with respect to any other indebtedness
    and an event of default that would be triggered by a change of
    control, as defined in the credit facility, and which is not
    expected to be triggered by this offering. As of
    December 31, 2007, December 31, 2008 and June 30,
    2009, we were in compliance with all covenants.
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SHARES
    ELIGIBLE FOR FUTURE SALE
Prior to this offering, there was no public market for our
    common stock.
Sale of
    Restricted Securities
After this offering, there will be
    outstanding           shares
    (assuming no exercise of the underwriters' option to
    purchase additional shares),
    or           shares
    (assuming full exercise of the underwriters' option to
    purchase additional shares), of our common stock. Of these
    shares, all of the shares sold in this offering will be freely
    tradable without restriction under the Securities Act of 1933,
    as amended, unless purchased by our "affiliates" as
    that term is defined in Rule 144 under the Securities Act.
    The remaining shares of common stock that will be outstanding
    after this offering are "restricted securities" within
    the meaning of Rule 144 under the Securities Act.
    Restricted securities may be sold in the public market only if
    they are registered under the Securities Act or are sold
    pursuant to an exemption from registration under Rule 144
    under the Securities Act, which is summarized below. Subject to
    the
lock-up
agreements described below, shares held by our affiliates that
    are not restricted securities may be sold subject to compliance
    with Rule 144 of the Securities Act without regard to the
    prescribed one-year holding period under Rule 144.
Lock-Up
Arrangements
In connection with this offering, we, each of our directors,
    executive officers, the selling stockholders and substantially
    all of our other stockholders have entered into
lock-up
agreements described under "Underwriting" that
    restrict the sale of shares of our common stock for up
    to  days after the date of this prospectus, subject to
    an extension in certain circumstances. In addition, in
    connection with a registration rights agreement we intend to
    enter into with our shareholders of Archipelago Learning
    Holdings, LLC, in connection with this
    offering,   % of the shares of our common stock
    acquired by holders of shares of Archipelago Learning Holdings,
    LLC in connection with the Corporate Reorganization will not be
    eligible for sale until   days following the
    expiration of the
lock-up
agreement with the underwriters and the remaining shares of our
    common stock acquired by them in our corporate organization will
    not become eligible for sale until the date that
    is   days following the expiration of the
lock-up
agreement with the underwriters.
    Accordingly,           shares
    of our common stock will be available for
    resale   days following the expiration of the
lock-up
agreement,
    and           shares
    of our common stock will be eligible for sale on the date that
    is      days following the expiration
    of the
lock-up
agreement with the underwriters.
By exercising their registration rights, and selling a large
    number of shares, the selling stockholders could cause the
    prevailing market price of our common stock to decline.
Following the
lock-up
periods set forth in the stockholders' agreement described
    above, all of the shares of our common stock that are restricted
    securities or are held by our affiliates as of the date of this
    prospectus will be eligible for sale in the public market in
    compliance with Rule 144 under the Securities Act.
Rule 144
The shares of our common stock sold in this offering will
    generally be freely transferable without restriction or further
    registration under the Securities Act, except that any shares of
    our common stock held by an "affiliate" of ours may
    not be resold publicly except in compliance with the
    registration requirements of the Securities Act or under an
    exemption under Rule 144 or otherwise. Rule 144
    permits our common stock that has been acquired by a person who
    is an affiliate of ours, or has been an affiliate of ours within
    the past three months, to be sold into the market in an amount
    that does not exceed, during any three-month period, the
    greater of:
•
one percent of the total number of shares of our common stock
    outstanding; or
•
the average weekly reported trading volume of our common stock
    for the four calendar weeks prior to the sale.
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Such sales are also subject to specific manner of sale
    provisions, a six-month holding period requirement, notice
    requirements and the availability of current public information
    about us.
Rule 144 also provides that a person who is not deemed to
    have been an affiliate of ours at any time during the three
    months preceding a sale, and who has for at least six months
    beneficially owned shares of our common stock that are
    restricted securities, will be entitled to freely sell such
    shares of our common stock subject only to the availability of
    current public information regarding us. A person who is not
    deemed to have been an affiliate of ours at any time during the
    three months preceding a sale, and who has beneficially owned
    for at least one year shares of our common stock that are
    restricted securities, will be entitled to freely sell such
    shares of our common stock under Rule 144 without regard to
    the current public information requirements of Rule 144.
Equity
    Incentive Plans
We intend to file one or more registration statements on
Form S-8
under the Securities Act to register shares of our common stock
    issued or reserved for issuance under our equity incentive
    plans, including the equity incentive plan we intend to adopt in
    connection with this offering. The first such registration
    statement is expected to be filed soon after the date of this
    prospectus and will automatically become effective upon filing
    with the SEC. Accordingly, shares registered under such
    registration statement will be available for sale in the open
    market, unless such shares are subject to vesting restrictions
    with us or the
lock-up
restrictions described above.
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CERTAIN
    MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material
    U.S. federal income and estate tax consequences of the
    ownership and disposition of common stock that may be relevant
    to you if you are a
non-U.S. Holder
(as defined below). This discussion is based on current law,
    which is subject to change, possibly with retroactive effect.
    This discussion is limited to
non-U.S. Holders
who hold shares of common stock as capital assets within the
    meaning of the U.S. Internal Revenue Code. Moreover, this
    discussion is for general information only and does not address
    all the tax consequences that may be relevant to you in light of
    your particular circumstances, nor does it discuss special tax
    provisions, which may apply to you if you relinquished
    U.S. citizenship or residence.
As used in this discussion, the term
"non-U.S. Holder"
means a beneficial owner of our common stock that is not, for
    U.S. federal income tax purposes:
•
an individual who is a citizen or resident of the United States;
•
a corporation (or other entity classified as a corporation for
    these purposes) created or organized in or under the laws of the
    United States or of any political subdivision of the United
    States;
•
a partnership (including any entity or arrangement classified as
    a partnership for these purposes);
•
an estate whose income is includible in gross income for
    U.S. federal income tax purposes regardless of its
    source; or
•
a trust, if (1) a U.S. court is able to exercise
    primary supervision over the trust's administration and one
    or more "United States persons" (within the meaning of
    the U.S. Internal Revenue Code) has the authority to
    control all of the trust's substantial decisions, or
    (2) the trust has a valid election in effect under
    applicable U.S. Treasury regulations to be treated as a
    "United States person."
If you are an individual, you may, in many cases, be deemed to
    be a resident alien, as opposed to a nonresident alien, by
    virtue of being present in the United States for at least
    31 days in the calendar year and for an aggregate of at
    least 183 days during a three-year period ending in the
    current calendar year. For these purposes, all the days present
    in the current year, one-third of the days present in the
    immediately preceding year, and one-sixth of the days present in
    the second preceding year are counted. Resident aliens are
    subject to U.S. federal income tax as if they were
    U.S. citizens.
If a partnership, including any entity or arrangement treated as
    a partnership for U.S. federal income tax purposes, is a
    holder of our common stock, the tax treatment of a partner in
    the partnership will generally depend upon the status of the
    partner, the activities of the partnership and certain
    determinations made at the partner level. A holder that is a
    partnership, and the partners in such partnership, should
    consult their own tax advisors regarding the tax consequences of
    the purchase, ownership and disposition of our common stock.
EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT
    A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX
    CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON
    STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE
    LAWS OF ANY U.S. STATE, MUNICIPALITY OR OTHER TAXING
    JURISDICTION, IN LIGHT OF THE PROSPECTIVE PURCHASER'S
    PARTICULAR CIRCUMSTANCES.
Dividends
We do not anticipate making any distributions on our common
    stock in the foreseeable future. See "Dividend
    Policy." If distributions are paid on shares of our common
    stock, such distributions will constitute dividends for
    U.S. federal income tax purposes to the extent paid from
    our current or accumulated earnings and profits, as determined
    under U.S. federal income tax principles. If a distribution
    exceeds our current and accumulated earnings and profits, it
    will constitute a return of capital that reduces, but not below
    zero, a
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non-U.S.
Holder's tax basis in our common stock. Any remainder will
    constitute gain from the sale or exchange of our common stock.
    If dividends are paid, as a
non-U.S. Holder,
you will be subject to withholding of U.S. federal income
    tax at a 30% rate, or a lower rate as may be specified by an
    applicable income tax treaty, on the gross amount of the
    dividends paid to you. To claim the benefit of a lower rate
    under an income tax treaty, you must properly file with the
    payor an Internal Revenue Service
Form W-8BEN,
or successor form, claiming an exemption from or reduction in
    withholding under the applicable tax treaty. In addition, where
    dividends are paid to a
non-U.S. Holder
that is a partnership or other pass-through entity, persons
    holding an interest in the entity may need to provide
    certification claiming an exemption or reduction in withholding
    under the applicable treaty.
If dividends are considered effectively connected with the
    conduct of a trade or business by you within the United States
    and, if required by an applicable income tax treaty, are
    attributable to a U.S. permanent establishment of yours,
    those dividends will be subject to U.S. federal income tax
    on a net basis at applicable graduated individual or corporate
    rates but will not be subject to withholding tax, provided an
    Internal Revenue Service
Form W-8ECI,
or successor form, is filed with the payor. If you are a foreign
    corporation, any effectively connected dividends may, under
    certain circumstances, be subject to an additional "branch
    profits tax" at a rate of 30% or a lower rate as may be
    specified by an applicable income tax treaty.
You must comply with the certification procedures described
    above, or, in the case of payments made outside the United
    States with respect to an offshore account, certain documentary
    evidence procedures, directly or under certain circumstances
    through an intermediary, to obtain the benefits of a reduced
    rate under an income tax treaty with respect to dividends paid
    with respect to your common stock. In addition, if you are
    required to provide an Internal Revenue Service
Form W-8ECI
or successor form, as discussed above, you must also provide
    your tax identification number.
If you are eligible for a reduced rate of U.S. withholding
    tax pursuant to an income tax treaty, you may obtain a refund of
    any excess amounts withheld by timely filing an appropriate
    claim for refund with the Internal Revenue Service.
Gain on
    Disposition of Common Stock
As a
non-U.S. Holder,
you generally will not be subject to U.S. federal income or
    withholding tax on any gain recognized on a sale or other
    disposition of common stock unless:
•
the gain is considered effectively connected with the conduct of
    a trade or business by you within the United States and, if
    required by an applicable income tax treaty, is attributable to
    a U.S. permanent establishment of yours (in which case the
    gain will be subject to U.S. federal income tax on a net
    basis at applicable individual or corporate rates and, if you
    are a foreign corporation, the gain may, under certain
    circumstances, be subject to an additional branch profits tax
    equal to 30% or a lower rate as may be specified by an
    applicable income tax treaty);
•
you are an individual who is present in the United States for
    183 or more days in the taxable year of the sale or other
    disposition and certain other conditions are met (in which case,
    except as otherwise provided by an applicable income tax treaty,
    the gain, which may be offset by U.S. source capital
    losses, generally will be subject to a flat 30%
    U.S. federal income tax, even though you are not considered
    a resident alien under the U.S. Internal Revenue
    Code); or
•
we are or become a U.S. real property holding corporation
    ("USRPHC"). We believe that we are not currently, and
    are not likely not to become, a USRPHC. Even if we were to
    become a USRPHC, gain on the sale or other disposition of common
    stock by you generally would not be subject to U.S. federal
    income tax provided:
•
the common stock was "regularly traded on an established
    securities market"; and
•
you do not actually or constructively own more than 5% of the
    common stock during the shorter of (i) the five-year period
    ending on the date of such disposition or (ii) the period
    of time during which you held such shares.
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Federal
    Estate Tax
Individuals, or an entity the property of which is includable in
    an individual's gross estate for U.S. federal estate
    tax purposes, should note that common stock held at the time of
    such individual's death will be included in such
    individual's gross estate for U.S. federal estate tax
    purposes and may be subject to U.S. federal estate tax,
    unless an applicable estate tax treaty provides otherwise.
Information
    Reporting and Backup Withholding Tax
We must report annually to the Internal Revenue Service and to
    each of you the amount of dividends paid to you and the tax
    withheld with respect to those dividends, regardless of whether
    withholding was required. Copies of the information returns
    reporting those dividends and withholding may also be made
    available to the tax authorities in the country in which you
    reside under the provisions of an applicable income tax treaty
    or other applicable agreements.
Backup withholding is generally imposed (currently at a 28%
    rate, which rate currently is scheduled to increase to 31% for
    taxable years beginning on or after January 1,
    2011) on certain payments to persons that fail to furnish
    the necessary identifying information to the payor. You
    generally will be subject to backup withholding tax with respect
    to dividends paid on your common stock unless you certify your
non-U.S. status.
Dividends subject to withholding of U.S. federal income tax
    as described above in "— Dividends" would
    not be subject to backup withholding.
The payment of proceeds of a sale of common stock effected by or
    through a U.S. office of a broker is subject to both backup
    withholding and information reporting unless you provide the
    payor with your name and address and you certify your
non-U.S. status
or you otherwise establish an exemption. In general, backup
    withholding and information reporting will not apply to the
    payment of the proceeds of a sale of common stock by or through
    a foreign office of a broker. If, however, such broker is, for
    U.S. federal income tax purposes, a U.S. person, a
    controlled foreign corporation, a foreign person that derives
    50% or more of its gross income for certain periods from the
    conduct of a trade or business in the United States or a foreign
    partnership that at any time during its tax year either is
    engaged in the conduct of a trade or business in the United
    States or has as partners one or more U.S. persons that, in
    the aggregate, hold more than 50% of the income or capital
    interest in the partnership, backup withholding will not apply
    but such payments will be subject to information reporting,
    unless such broker has documentary evidence in its records that
    you are a
non-U.S. Holder
and certain other conditions are met or you otherwise establish
    an exemption.
Any amounts withheld under the backup withholding rules
    generally will be allowed as a refund or a credit against your
    U.S. federal income tax liability provided the required
    information is furnished in a timely manner to the Internal
    Revenue Service.
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UNDERWRITING
We intend to offer the shares through the underwriters. Merrill
    Lynch, Pierce, Fenner & Smith Incorporated is acting
    as the representative of the underwriters named below. Subject
    to the terms and conditions described in a purchase agreement
    among us, the selling stockholders and the underwriters, we and
    the selling stockholders have agreed to sell to the
    underwriters, and the underwriters severally have agreed to
    purchase from us and the selling stockholders, the number of
    shares listed opposite their names below.
Number
Underwriter
of Shares
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Total
The underwriters have agreed to purchase all of the shares sold
    under the purchase agreement if any of these shares are
    purchased. If an underwriter defaults, the purchase agreement
    provides that the purchase commitments of the non-defaulting
    underwriters may be increased or the purchase agreement may be
    terminated.
We and the selling stockholders have agreed to indemnify the
    underwriters against certain liabilities, including liabilities
    under the Securities Act of 1933, as amended, and to contribute
    to payments the underwriters may be required to make in respect
    of those liabilities.
The underwriters are offering the shares, subject to prior sale,
    when, as and if issued to and accepted by them, subject to
    approval of legal matters by their counsel, including the
    validity of the shares, and other conditions contained in the
    purchase agreement, such as the receipt by the underwriters of
    officer's certificates and legal opinions. The underwriters
    reserve the right to withdraw, cancel or modify offers to the
    public and to reject orders in whole or in part.
Commissions
    and Discounts
The representative has advised us and the selling stockholders
    that the underwriters propose initially to offer the shares to
    the public at the initial public offering price on the cover
    page of this prospectus and to dealers at that price less a
    concession not in excess of $      per
    share. The underwriters may allow, and the dealers may reallow,
    a discount not in excess of $      per
    share to other dealers. After the initial public offering, the
    public offering price, concession and discount may be changed.
The following table shows the public offering price,
    underwriting discount and proceeds before expenses to us and the
    selling stockholders. The information assumes either no exercise
    or full exercise by the underwriters of their over-allotment
    option.
Per Share
Without Option
With Option
Public offering price
$
$
$
Underwriting discount
$
$
$
Proceeds, before expenses, to us
$
$
$
Proceeds, before expenses, to the selling stockholders
$
$
$
The expenses of this offering, not including the underwriting
    discount, are estimated at $      and
    are payable by us and the selling stockholders.
Over-allotment
    Option
We and the selling stockholders have granted options to the
    underwriters to purchase up
    to          
    additional shares at the public offering price less the
    underwriting discount. The underwriters may exercise these
    options for 30 days from the date of this prospectus solely
    to cover any over-allotments. If the underwriters exercise these
    options, each will be obligated, subject to conditions contained
    in the purchase
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agreement, to purchase a number of additional shares
    proportionate to that underwriter's initial amount
    reflected in the above table.
No Sales
    of Similar Securities
We and the selling stockholders and our executive officers and
    directors have agreed, with exceptions, not to sell or transfer
    any common stock for   days after the date of
    this prospectus without first obtaining the written consent of
    Merrill Lynch. Specifically, we and these other individuals have
    agreed not to directly or indirectly:
•
offer, pledge, sell or contract to sell any common stock,
•
sell any option or contract to purchase any common stock,
•
purchase any option or contract to sell any common stock,
•
grant any option, right or warrant for the sale of any common
    stock,
•
lend or otherwise dispose of or transfer any common stock,
•
request or demand that we file a registration statement related
    to the common stock, or
•
enter into any swap or other agreement that transfers, in whole
    or in part, the economic consequence of ownership of any common
    stock whether any such swap or transaction is to be settled by
    delivery of shares or other securities, in cash or otherwise.
This
lock-up
provision applies to common stock and to securities convertible
    into or exchangeable or exercisable for or repayable with common
    stock. It also applies to common stock owned now or acquired
    later by the person executing the agreement or for which the
    person executing the agreement later acquires the power of
    disposition.
The   -day
restricted period will be automatically extended if
    (1) during the last 17 days of the
lock-up
restricted period, we issue an earnings release or material news
    or a material event relating to us occurs or (2) before the
    expiration of
the   -day
restricted period, we announce that we will release earnings
    results or becomes aware that material news or a material event
    will occur during the
16-day
period beginning on the last day of
the   -day
restricted period, in which case the restrictions described
    above will continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
    occurrence of the material news or material event. The
    exceptions permit us, among other things and subject to
    restrictions, to issue common stock or options pursuant to our
    long term equity incentive plan or pursuant to the exercise of
    employee stock options or other awards.
NYSE or
    Nasdaq Listing
We expect the shares to be approved for listing on either the
    NYSE or Nasdaq under the symbol "ARCL."
Offering
    Price Determination
Before this offering, there has been no public market for our
    common stock. The initial public offering price will be
    determined through negotiations among us, the selling
    stockholders and the representative. In addition to prevailing
    market conditions, the factors to be considered in determining
    the initial public offering price are
•
the information set forth in this prospectus and otherwise
    available to the underwriters,
•
the valuation multiples of publicly traded companies that the
    representative believes to be comparable to us,
•
our financial information,
•
the history of, and the prospects for, our company and the
    industry in which we compete,
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•
an assessment of our management, its past and present
    operations, and the prospects for, and timing of, our future
    revenue,
•
the present state of our development,
•
the general condition of the securities markets at the time of
    this offering, and
•
the above factors in relation to market values and various
    valuation measures of other companies engaged in activities
    similar to ours.
An active trading market for the shares may not develop. It is
    also possible that after the offering the shares will not trade
    in the public market at or above the initial public offering
    price.
The underwriters do not expect to sell more than 5% of the
    shares in the aggregate to accounts over which they exercise
    discretionary authority.
Price
    Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may
    limit underwriters and selling group members from bidding for
    and purchasing our common stock. However, the representative may
    engage in transactions that stabilize the price of the common
    stock, such as bids or purchases to peg, fix or maintain that
    price.
If the underwriters create a short position in the common stock
    in connection with the offering, i.e., if they sell more shares
    than are listed on the cover of this prospectus, the
    representative may reduce that short position by purchasing
    shares in the open market. The representative may also elect to
    reduce any short position by exercising all or part of the
    over-allotment option described above. Purchases of the common
    stock to stabilize its price or to reduce a short position may
    cause the price of the common stock to be higher than it might
    be in the absence of such purchases.
The representative may also impose a penalty bid on underwriters
    and selling group members. This means that if the representative
    purchase shares in the open market to reduce the
    underwriters' short position or to stabilize the price of
    such shares, they may reclaim the amount of the selling
    concession from the underwriters and selling group members who
    sold those shares. The imposition of a penalty bid may also
    affect the price of the shares in that it discourages resales of
    those shares.
Neither we nor any of the underwriters makes any representation
    or prediction as to the direction or magnitude of any effect
    that the transactions described above may have on the price of
    the common stock. In addition, neither we nor any of the
    underwriters makes any representation that the representative
    will engage in these transactions or that these transactions,
    once commenced, will not be discontinued without notice.
Selling
    Restrictions
This prospectus does not constitute an offer of, or an
    invitation by or on behalf of us, or by or on behalf of the
    underwriters, to subscribe for or purchase, any of the shares in
    any jurisdiction to any person to whom it is unlawful to make
    such an offer or solicitation in that jurisdiction. The
    distribution of this prospectus and the offering of the shares
    in certain jurisdictions may be restricted by law. We and the
    underwriters require persons into whose possession this
    prospectus comes to inform themselves about and to observe any
    such restrictions.
European
    Economic Area
In relation to each Member State of the European Economic Area
    which has implemented the Prospectus Directive (each, a Relevant
    Member State), each underwriter has represented and agreed that
    with effect from and including the date on which the Prospectus
    Directive is implemented in that Relevant Member State (or the
    Relevant Implementation Date) it has not made and will not make
    an offer of common stock to the public in that Relevant Member
    State before the publication of a prospectus in relation to the
    common stock which has been approved by the competent authority
    in that Relevant Member State or, where
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appropriate, approved in another Relevant Member State and
    notified to the competent authority in that Relevant Member
    State, all in accordance with the Prospectus Directive, except
    that it may, with effect from and including the Relevant
    Implementation Date, make an offer of common stock to the public
    in that Relevant Member State at any time:
•
to legal entities which are authorized or regulated to operate
    in the financial markets or, if not so authorized or regulated,
    whose corporate purpose is solely to invest in securities;
•
to any legal entity which has two or more of (i) an average
    of at least 250 employees during the last financial year;
    (ii) a total balance sheet of more than €43,000,000
    and (iii) an annual net turnover of more than
    €50,000,000, as shown in its last annual or consolidated
    accounts; or
•
in any other circumstances which do not require the publication
    by the Issuer of a prospectus pursuant to Article 3 of the
    Prospectus Directive.
For the purposes of this provision, the expression an
    "offer of common stock to the public" in relation to
    any common stock in any Relevant Member State means the
    communication in any form and by any means of sufficient
    information on the terms of the offer and the common stock to be
    offered so as to enable an investor to decide to purchase or
    subscribe the common stock, as the same may be varied in that
    Relevant Member State by any measure implementing the Prospectus
    Directive in that Relevant Member State and the expression
    Prospectus Directive means Directive 2003/71/EC and includes any
    relevant implementing measure in each Relevant Member State.
Each underwriter has represented and agreed that:
•
it has not made or will not make an offer of the common stock to
    the public in the United Kingdom within the meaning of section
    102B of the Financial Services and Markets Act 2000 (as amended)
    (FSMA) except to legal entities which are authorized or
    regulated to operate in the financial markets or, if not so
    authorised or regulated, whose corporate purpose is solely to
    invest in securities or otherwise in circumstances which do not
    require the publication by the company of a prospectus pursuant
    to the Prospectus Rules of the Financial Services
    Authority (FSA);
•
it has only communicated or caused to be communicated and will
    only communicate or cause to be communicated an invitation or
    inducement to engage in investment activity (within the meaning
    of Section 21 of FSMA) to persons who have professional
    experience in matters relating to investments falling within
    Article 19(5) of the Financial Services and Markets Act
    2000 (Financial Promotion) Order 2005 or in circumstances in
    which Section 21 of FSMA does not apply to it; and
•
it has complied with and will comply with all applicable
    provisions of FSMA with respect to anything done by it in
    relation to the common stock in, from or otherwise involving the
    United Kingdom.
Switzerland
This document, as well as any other material relating to the
    shares which are the subject of the offering contemplated by
    this prospectus, do not constitute an issue prospectus pursuant
    to Article 652a of the Swiss Code of Obligations. The
    shares will not be listed on the SWX Swiss Exchange and,
    therefore, the documents relating to the shares, including, but
    not limited to, this document, do not claim to comply with the
    disclosure standards of the listing rules of SWX Swiss Exchange
    and corresponding prospectus schemes annexed to the listing
    rules of the SWX Swiss Exchange. The shares are being offered in
    Switzerland by way of a private placement,
i.e.
to a
    small number of selected investors only, without any public
    offer and only to investors who do not purchase the shares with
    the intention to distribute them to the public. The investors
    will be individually approached by us from time to time. This
    document, as well as any other material relating to the shares,
    is personal and confidential and do not constitute an offer to
    any other person. This document may only be used by those
    investors to whom it has been handed out in connection with the
    offering described
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herein and may neither directly nor indirectly be distributed or
    made available to other persons without our express consent. It
    may not be used in connection with any other offer and shall in
    particular not be copied
and/or
distributed to the public in (or from) Switzerland.
Dubai
    International Financial Centre
This document relates to an exempt offer in accordance with the
    Offered Securities Rules of the Dubai Financial Services
    Authority. This document is intended for distribution only to
    persons of a type specified in those rules. It must not be
    delivered to, or relied on by, any other person. The Dubai
    Financial Services Authority has no responsibility for reviewing
    or verifying any documents in connection with exempt offers. The
    Dubai Financial Services Authority has not approved this
    document nor taken steps to verify the information set out in
    it, and has no responsibility for it. The shares which are the
    subject of the offering contemplated by this prospectus may be
    illiquid
and/or
subject to restrictions on their resale. Prospective purchasers
    of the shares offered should conduct their own due diligence on
    the shares. If you do not understand the contents of this
    document you should consult an authorised financial adviser.
Australia
This document has not been lodged with the Australian
    Securities & Investments Commission and is only
    directed to certain categories of exempt persons. Accordingly,
    if you receive this document in Australia:
a. you confirm and warrant that you are either:
i. a "sophisticated investor" under
    section 708(8)(a) or (b) of the Corporations Act 2001
    (Cth) of Australia ("Corporations Act");
ii. a "sophisticated investor" under
    section 708(8)(c) or (d) of the Corporations Act and
    that you have provided an accountant's certificate to the
    section 708(8)(c)(i) or (ii) of the Corporations Act
    and related regulations before the offer has been made;
iii. a person associated with the company under
    section 708(12) of the Corporations Act; or
iv. "professional investor" within the meaning of
    section 708(11)(a) or (b) of the Corporations Act, and to
    the extent that you are unable to confirm or warrant that you
    are an exempt sophisticated investor, associated person or
    professional investor under the Corporations Act any offer made
    to you under this document is void and incapable of acceptance.
b. you warrant and agree that you will not offer any of the
    shares issued to you pursuant to this document for resale in
    Australia within 12 months of those shares being issued
    unless any such resale offer is exempt from the requirement to
    issue a disclosure document under section 708 of the
    Corporations Act.
Japan
The Shares have not been and will not be registered under the
    Financial Instruments and Exchange Law, as amended (the
    "FIEL"). This document is not an offer of securities
    for sale, directly or indirectly, in Japan or to, or for the
    benefit of, any resident of Japan (which term as used herein
    means any person resident in Japan, including any corporation or
    entity organized under the laws of Japan) or to others for
    reoffer or resale, directly or indirectly, in Japan or to, or
    for the benefit of, any resident of Japan, except pursuant to an
    exemption from the registration requirements under the FIEL and
    otherwise in compliance with such law and any other applicable
    laws, regulations and ministerial guidelines of Japan.
Hong
    Kong
This prospectus has not been approved by or registered with the
    Securities and Futures Commission of Hong Kong or the Registrar
    of Companies of Hong Kong. No person may offer or sell in Hong
    Kong, by means of any document, any Shares other than
    (a) to "professional investors" as defined in the
    Securities and Futures Ordinance (Cap. 571) of Hong Kong
    and any rules made under that Ordinance; or (b) in other
    circumstances which do not result in the document being a
    "prospectus" as defined in the Companies
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Ordinance (Cap. 32) of Hong Kong or which do not constitute
    an offer to the public within the meaning of that Ordinance. No
    person may issue or have in its possession for the purposes of
    issue, whether in Hong Kong or elsewhere, any advertisement,
    invitation or document relating to the Shares which is directed
    at, or the contents of which are likely to be accessed or read
    by, the public of Hong Kong (except if permitted to do so under
    the securities laws of Hong Kong) other than with respect to
    Shares which are or are intended to be disposed of only to
    persons outside Hong Kong or only to "professional
    investors" as defined in the Securities and Futures
    Ordinance and any rules made under that Ordinance.
The contents have not been reviewed by any regulatory authority
    in Hong Kong. You are advised to exercise caution in relation to
    the offer. If you are in any doubt about any of the contents of
    this document, you should obtain independent professional advice.
Singapore
This prospectus has not been registered as a prospectus with the
    Monetary Authority of Singapore under the Securities and Futures
    Act, Chapter 289 of Singapore (the Securities and Futures
    Act). Accordingly, the shares may not be offered or sold or made
    the subject of an invitation for subscription or purchase nor
    may this prospectus or any other document or material in
    connection with the offer or sale or invitation for subscription
    or purchase of any shares be circulated or distributed, whether
    directly or indirectly, to any person in Singapore other than
    (a) to an institutional investor pursuant to
    Section 274 of the Securities and Futures Act, (b) to
    a relevant person, or any person pursuant to
    Section 275(1A) of the Securities and Futures Act, and in
    accordance with the conditions specified in Section 275 of
    the Securities and Futures Act, or (c) pursuant to, and in
    accordance with the conditions of, any other applicable
    provision of the Securities and Futures Act.
Each of the following relevant persons specified in
    Section 275 of the Securities and Futures Act who has
    subscribed for or purchased shares, namely a person who is:
(a) a corporation (which is not an accredited investor) the
    sole business of which is to hold investments and the entire
    share capital of which is owned by one or more individuals, each
    of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited
    investor) whose sole purpose is to hold investments and each
    beneficiary is an accredited investor,
should note that shares, debentures and units of shares and
    debentures of that corporation or the beneficiaries' rights
    and interest in that trust shall not be transferable for six
    months after that corporation or that trust has acquired the
    shares under Section 275 of the Securities and Futures Act
    except:
(a) to an institutional investor under Section 274 of
    the Securities and Futures Act or to a relevant person, or any
    person pursuant to Section 275(1A) of the Securities and
    Futures Act, and in accordance with the conditions, specified in
    Section 275 of the Securities and Futures Act;
(b) where no consideration is given for the
    transfer; or
(c) by operation of law.
Internet
    Distribution
Merrill Lynch will be facilitating internet distribution for
    this offering to certain of its internet subscription customers.
    Merrill Lynch intends to allocate a limited number of shares for
    sale to its online brokerage customers. An electronic prospectus
    is available on internet web sites maintained by Merrill Lynch.
    Other than the prospectus in electronic format, the information
    on Merrill Lynch's web sites is not part of this prospectus.
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Other
    Relationships
The underwriter and its affiliates have engaged in, and may in
    the future engage in, investment banking and other commercial
    dealings in the ordinary course of business with us. They have
    received customary fees and commissions for these transactions.
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LEGAL
    MATTERS
Weil, Gotshal & Manges LLP has passed upon the
    validity of the common stock offered hereby on behalf of us.
    Certain legal matters will be passed upon on behalf of the
    underwriters by Fried, Frank, Harris, Shriver &
    Jacobson LLP, New York, New York.
EXPERTS
The balance sheet of Archipelago Learning, Inc. as of
    August 31, 2009, included in this prospectus, has been
    audited by Deloitte & Touche LLP, an independent
    registered public accounting firm, as stated in their report
    appearing herein and elsewhere in the registration statement of
    which this prospectus is a part. Such balance sheet is included
    in reliance upon the report of such firm given upon their
    authority as experts in accounting and auditing.
The financial statements of Archipelago Learning Holdings, LLC
    as of December 31, 2007 and 2008, and for each of the three
    years in the period ended December 31, 2008, included in
    this prospectus, have been audited by Deloitte &
    Touche LLP, an independent registered public accounting firm, as
    stated in their report appearing herein and elsewhere in the
    registration of which this prospectus is a part. Such financial
    statements are included in reliance upon the report of such firm
    given upon their authority as experts in accounting and auditing.
WHERE YOU
    CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act with respect to the common stock
    offered hereby. This prospectus does not contain all of the
    information set forth in the registration statement and the
    exhibits and schedules thereto. For further information with
    respect to Archipelago Learning, Inc. and the common stock
    offered hereby, you should refer to the registration statement
    and to the exhibits and schedules filed therewith. Statements
    contained in this prospectus regarding the contents of any
    contract or any other document that is filed as an exhibit to
    the registration statement are not necessarily complete, and
    each such statement is qualified in all respects by reference to
    the full text of such contract or other document filed as an
    exhibit to the registration statement. A copy of the Archipelago
    Learning, Inc. registration statement and the exhibits and
    schedules thereto may be inspected without charge at the public
    reference room maintained by the SEC located at
    100 F Street, N.E., Room 1580,
    Washington, D.C. 20549. Copies of all or any portion of the
    registration statements and the filings may be obtained from
    such offices upon payment of prescribed fees. The public may
    obtain information on the operation of the public reference room
    by calling the SEC at
1-800-SEC-0330
or
(202) 551-8090.
The SEC maintains a website at www.sec.gov that contains
    reports, proxy and information statements and other information
    regarding registrants that file electronically with the SEC.
You may obtain a copy of any of our filings, at no cost, by
    writing or telephoning us at:
Archipelago Learning, Inc.
3400 Carlisle Street, Suite 345
Dallas, TX 75204
(800) 419-3191
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INDEX TO
    FINANCIAL STATEMENTS
Page
Archipelago Learning, Inc.
Audited Financial Statement
Report of Independent Registered Public
    Accounting Firm
F-2
Balance Sheet as of August 31, 2009
F-3
Notes to Balance Sheet
F-4
Archipelago Learning Holdings, LLC
Audited Consolidated Financial Statements
Report of Independent Registered Public
    Accounting Firm
F-5
Consolidated Balance Sheets as of
    December 31, 2007 and 2008 and June 30, 2009
    (unaudited)
F-6
Consolidated Statements of Income for the years
    ended December 31, 2006, 2007 and 2008 and the six months
    ended June 30, 2008 and 2009 (unaudited)
F-7
Consolidated Statements of Changes in
    Members' Equity for the years ended December 31, 2006,
    2007 and 2008 and the six months ended June 30, 2009
    (unaudited)
F-8
Consolidated Statements of Cash Flows for the
    year ended December 31, 2006, 2007 and 2008 and the six
    months ended June 30, 2008 and 2009 (unaudited)
F-9
Notes to Consolidated Financial Statements
F-10
F-1
Table of Contents
REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholder of
Archipelago Learning, Inc.
Dallas, Texas
We have audited the accompanying balance sheet of Archipelago
    Learning, Inc. (the "Company") as of August 31,
    2009. This financial statement is the responsibility of the
    Company's management. Our responsibility is to express an
    opinion on this financial statement based on our audit.
We conducted our audit in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. The Company is not required to
    have, nor were we engaged to perform, an audit of its internal
    control over financial reporting. Our audits included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the Company's internal control over
    financial reporting. Accordingly, we express no such opinion. An
    audit also includes examining, on a test basis, evidence
    supporting the amounts and disclosures in the financial
    statements, assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audit provides a reasonable basis for our opinion.
In our opinion, such financial statement presents fairly, in all
    material respects, the financial position of Archipelago
    Learning, Inc. as of August 31, 2009, in conformity with
    accounting principles generally accepted in the United States of
    America.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
September 2, 2009
F-2
Table of Contents
ARCHIPELAGO
    LEARNING, INC.
BALANCE
    SHEET AS OF AUGUST 31, 2009
ASSETS
Cash
$
1,000
STOCKHOLDER EQUITY
Common stock (par value $10.00 per share, 100 shares
    authorized, issued and outstanding)
$
1,000
See notes to financial statements.
F-3
Table of Contents
ARCHIPELAGO
    LEARNING, INC.
NOTES TO BALANCE SHEET
AS OF AUGUST 31, 2009
1.
ORGANIZATION
Archipelago Learning, Inc. (the "Company") was
    incorporated as a Delaware corporation on August 4, 2009,
    and has no material assets or any operations.
2.
BASIS OF
    PRESENTATION
The Company's Balance Sheet has been prepared in accordance
    with U.S. generally accepted accounting principles.
    Separate Statements of Income, Changes in Stockholders'
    Equity and of Cash Flows have not been presented because this
    entity has had no activity.
3.
STOCKHOLDER
    EQUITY
The Company has been capitalized with the issuance of
    100 shares of Common Stock with a par value of $10.00 per
    share for a total of $1,000.
F-4
Table of Contents
REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Managers and Stockholders of
Archipelago Learning Holdings, LLC
Dallas, Texas
We have audited the accompanying consolidated balance sheets of
    Archipelago Learning Holdings, LLC and subsidiaries (the
    "Company") as of December 31, 2008 and 2007, and
    the related consolidated statements of income, changes in
    members' equity and cash flows for each of the three years
    in the period ended December 31, 2008. These financial
    statements are the responsibility of the Company's
    management. Our responsibility is to express an opinion on these
    financial statements based on our audits.
We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. The Company is not required to
    have, nor were we engaged to perform, an audit of its internal
    control over financial reporting. Our audits included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the Company's internal control over
    financial reporting. Accordingly, we express no such opinion. An
    audit also includes examining, on a test basis, evidence
    supporting the amounts and disclosures in the financial
    statements, assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
    fairly, in all material respects, the financial position of
    Archipelago Learning Holdings, LLC and subsidiaries as of
    December 31, 2008 and 2007, and the results of its
    operations and its cash flows for each of the three years in the
    period ended December 31, 2008, in conformity with
    accounting principles generally accepted in the United States of
    America.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
March 24, 2009 (September 2, 2009 as to earnings per
    share described in Note 2, the fair value of financial
    instruments described in Note 3, segment information
    described in Note 14, and the subsequent event described in
    Note 16)
F-5
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC
CONSOLIDATED
    BALANCE SHEETS
Pro Forma
As of
As of
As of December 31,
June 30,
June 30,
2007
2008
2009
2009
(Unaudited)
(In thousands, except share data)
(Unaudited)
(See Note 2)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
11,060
$
13,144
$
15,940
Accounts receivable — net of allowance for doubtful
    accounts
3,674
6,093
6,344
Prepaid expenses and other current assets
469
357
818
Total current assets
15,203
19,594
23,102
PROPERTY AND EQUIPMENT — Net
793
1,782
1,781
GOODWILL
94,373
103,267
103,267
INTANGIBLE ASSETS — Net
15,551
16,106
15,087
OTHER LONG-TERM ASSETS
1,671
1,276
1,175
TOTAL
$
127,591
$
142,025
$
144,412
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable — trade
$
57
$
382
$
309
Wage and employee-related liabilities
1,640
1,918
1,536
Deferred revenue
15,819
24,632
22,758
Other accrued liabilities
219
192
248
Current portion of long-term debt
700
700
700
Interest payable
191
210
109
Interest rate swap
206
1,988
1,574
Total current liabilities
18,832
30,022
27,234
LONG-TERM DEBT — Net of current portion
69,300
68,600
67,726
LONG-TERM DEFERRED REVENUE — Net of current portion
1,112
2,290
3,710
LONG-TERM DEFERRED TAX LIABILITY
—
639
563
OTHER LONG-TERM LIABILITY (NOTE 9)
—
—
230
COMMITMENTS AND CONTINGENCIES (NOTE 10)
MEMBERS' EQUITY:
Class A shares (109,545,064 shares authorized, issued
    and outstanding at December 31, 2007 and 2008 and
    June 30, 2009)
34,792
34,792
34,792
Class A-2 shares
(no shares authorized, issued and outstanding at
    December 31, 2007; 286,882 shares authorized, issued
    and outstanding at December 31, 2008 and June 30, 2009)
—
750
750
Class B shares (6,085,837 shares authorized,
    5,720,692 shares issued and outstanding at
    December 31, 2007; 6,578,727 shares authorized,
    5,355,440 shares issued and outstanding at
    December 31, 2008; 6,578,727 shares authorized,
    6,028,727 shares issued and outstanding at June 30,
    2009
345
684
855
Class C shares (6,085,837 shares authorized,
    5,720,692 shares issued and outstanding at
    December 31, 2007; 7,126,451 shares authorized,
    5,903,164 shares issued and outstanding at
    December 31, 2008; 7,126,451 shares authorized,
    6,576,451 shares issued and outstanding at June 30,
    2009
286
302
343
Retained earnings
2,924
3,946
8,209
Total members' equity
38,347
40,474
44,949
TOTAL
$
127,591
$
142,025
$
144,412
See notes to consolidated financial statements.
F-6
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC
CONSOLIDATED
    STATEMENTS OF INCOME
Twelve Months Ended December 31,
Six Months Ended June 30,
2006
2007
2008
2008
2009
(Predecessor)
(Unaudited)
(Unaudited)
(Successor)
(In thousands, except share and per share data)
SERVICE REVENUE
$
10,065
$
18,250
$
32,068
$
14,000
$
21,427
COST OF REVENUE
343
750
2,178
703
1,782
GROSS PROFIT
9,722
17,500
29,890
13,297
19,645
OPERATING EXPENSES:
Sales and marketing
2,793
7,669
13,193
6,195
6,972
Content development
712
1,206
2,162
926
1,588
General and administrative
2,581
5,010
6,644
2,310
4,417
Total operating expenses
6,086
13,885
21,999
9,431
12,977
INCOME FROM OPERATIONS
3,636
3,615
7,891
3,866
6,668
OTHER INCOME (EXPENSE):
Interest expense
—
(838
)
(5,161
)
(2,745
)
(1,377
)
Interest income
27
343
247
160
14
Derivative loss
—
(173
)
(2,119
)
(309
)
(141
)
Total other income (expense)
27
(668
)
(7,033
)
(2,894
)
(1,504
)
INCOME BEFORE INCOME TAXES
3,663
2,947
858
972
5,164
(Provision) benefit for income taxes
—
(23
)
164
(42
)
(133
)
NET INCOME
$
3,663
$
2,924
$
1,022
$
930
$
5,031
Net income per equity share attributable to members' equity:
Basic and Diluted (NOTE 2)
$
1,832
$
0.03
$
0.01
$
0.01
$
0.05
Weighted-average equity shares and equivalents outstanding:
Basic and Diluted (NOTE 2)
2
109,545,064
109,545,064
109,545,064
109,545,064
Unaudited pro forma net income per common share:
Basic and Diluted (NOTE 2)
$
Unaudited pro forma weighted-average common shares and
    equivalents outstanding:
Basic and Diluted (NOTE 2)
See notes to consolidated financial statements.
F-7
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC
CONSOLIDATED
    STATEMENTS OF CHANGES IN MEMBERS' EQUITY
    (DEFICIT)
Total
Study Island LP
Class C
Members'
Partner Capital
Class A Shares
Class A-2 Shares
Class B Shares
Shares
Retained
Equity
(Deficit)
Units
Value
Units
Value
Units
Value
Units
Value
Earnings
(Deficit)
(In thousands)
BALANCE — January 1, 2006
$
(2,844
)
—
$
—
—
$
—
—
$
—
—
$
—
$
—
$
(2,844
)
Distributions
(6,354
)
—
—
—
—
—
—
—
—
—
(6,354
)
Net income
3,663
—
—
—
—
—
—
—
—
—
3,663
BALANCE — December 31, 2006 (Predecessor)
(5,535
)
—
—
—
—
—
—
—
—
—
(5,535
)
Distribution to predecessor
(1,178
)
—
—
—
—
—
—
—
—
—
(1,178
)
Reorganization due to change in ownership
6,713
—
—
—
—
—
—
—
—
—
6,713
Shares issued
—
109,545
109,545
—
—
—
—
—
—
—
109,545
Distributions
—
—
(74,753
)
—
—
—
—
—
—
—
(74,753
)
Stock-based compensation
—
—
—
—
—
5,721
345
5,721
286
631
Net income
—
—
—
—
—
—
—
—
—
2,924
2,924
BALANCE — December 31, 2007
—
109,545
34,792
—
—
5,721
345
5,721
286
2,924
38,347
Shares issued
—
—
—
287
750
—
—
—
—
—
750
Stock-based compensation
—
—
—
—
—
456
372
456
30
—
402
Forfeitures of stock-based compensation
—
—
—
—
—
(822
)
(33
)
(274
)
(14
)
—
(47
)
Net income
—
—
—
—
—
—
—
—
—
1,022
1,022
BALANCE — December 31, 2008
$
—
109,545
$
34,792
287
$
750
5,355
$
684
5,903
$
302
$
3,946
$
40,474
Distributions
—
—
—
—
—
—
—
—
—
(768
)
(768
)
Stock-based compensation
—
—
—
—
—
673
171
673
41
—
212
Net income
—
—
—
—
—
—
—
—
—
5,031
5,031
BALANCE — June 30, 2009 (unaudited)
$
—
109,545
$
34,792
287
$
750
6,028
$
855
6,576
$
343
$
8,209
$
44,949
See notes to consolidated financial statements.
F-8
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC
CONSOLIDATED
    STATEMENTS OF CASH FLOWS
Twelve Months Ended December 31,
Six Months Ended June 30,
2006
2007
2008
2008
2009
(Predecessor)
(Unaudited)
(Unaudited)
(Successor)
(In thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net income
$
3,663
$
2,924
$
1,022
$
930
$
5,031
Adjustments to reconcile net income to net cash provided by
    operating activities:
Amortization of debt financing costs
—
36
179
81
101
Depreciation and amortization
71
1,670
2,183
942
1,520
Stock-based compensation
—
631
355
189
212
Unrealized gain on investments
(21
)
—
—
—
—
Provision (benefit) for uncollectable accounts receivable
—
38
51
(19
)
2
Unrealized loss (gain) on interest rate swap
—
205
1,783
228
(414
)
Deferred income taxes
—
—
(247
)
—
(99
)
Changes in operating assets and liabilities, net of impact of
    acquisitions:
Accounts receivable
(1,129
)
(1,542
)
(2,270
)
(674
)
(254
)
Prepaid expenses and other
—
(469
)
176
(69
)
(437
)
Accounts payable
—
55
276
(4
)
(211
)
Accrued liabilities
428
1,557
252
(482
)
(426
)
Deferred revenues
4,439
7,613
9,791
1,727
(454
)
Other long-term liability
—
—
—
—
230
Net cash provided by operating activities
7,451
12,718
13,551
2,849
4,801
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(211
)
(498
)
(1,324
)
(542
)
(363
)
Business acquisition
—
(84,787
)
(9,658
)
(9,658
)
—
Net cash used in investing activities
(211
)
(85,285
)
(10,982
)
(10,200
)
(363
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to predecessor
(6,354
)
(846
)
—
—
—
Proceeds from issuance of shares
—
89,545
—
—
—
Return of Capital distributions to parent shareholders
—
(74,753
)
—
—
Advance to shareholder
—
—
—
(750
)
—
Tax distribution to parent shareholders
—
—
—
—
(768
)
Cost of debt financing
—
(1,706
)
215
215
—
Proceeds from revolver
—
—
10,000
—
—
Payments on revolver
—
—
(10,000
)
—
—
Proceeds from term note
—
70,000
—
—
—
Payment on term note
—
—
(700
)
(350
)
(874
)
Net cash (used in) provided by financing activities
(6,354
)
82,240
(485
)
(885
)
(1,642
)
NET CHANGE IN CASH AND CASH EQUIVALENTS:
886
9,673
2,084
(8,236
)
2,796
Beginning of period
501
1,387
11,060
11,060
13,144
End of period
$
1,387
$
11,060
$
13,144
$
2,824
$
15,940
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest
$
—
$
612
$
4,992
$
2,626
$
1,371
Cash paid for income taxes
$
20
$
—
$
44
$
9
$
25
NON-CASH INVESTING AND FINANCING ACTIVITIES
Accrued purchases of property and equipment
$
—
$
49
$
19
$
—
$
138
Non-cash distribution to Predecessor (Note 10)
$
—
$
332
$
—
$
—
$
—
Issuance of shares in business acquisitions (Note 1)
$
—
$
20,000
$
750
$
750
$
—
See notes to consolidated financial statements.
F-9
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2006 (PREDECESSOR),
AS OF AND FOR THE YEARS ENDED 2007 AND 2008
(SUCCESSOR) AND AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2008
    AND 2009
1.
ORGANIZATION
Archipelago Learning Holdings, LLC (the "Company") is
    a leading subscription-based online education company. The
    Company provides standards-based instruction, practice,
    assessments and productivity tools that improve the performance
    of educators and students via proprietary web-based platforms.
    Study Island, our core product line, helps students in
    Kindergarten through 12th grade, or K-12, master grade
    level academic standards in a fun and engaging manner. During
    the 2008-2009 school year, Study Island products were utilized
    by 8.3 million students in over 19,200 schools in
    50 states who answered over 2.8 billion practice
    questions. The Company recently began offering classroom and
    school web portals, digital lockers and teacher productivity
    tools through their TeacherWeb services and online post
    secondary programs through their Northstar Learning product line.
Archipelago Learning, Inc. was incorporated as a Delaware
    corporation on August 4, 2009, and will act as a holding
    company for the Company's business upon completion of the
    offering. The Company initially capitalized Archipelago
    Learning, Inc. with $1,000 for 100 shares of Archipelago
    Learning, Inc. Archipelago Learning, Inc. has no operations.
On July 2, 2009, the Company changed its name from
    "Study Island Holdings, LLC" to "Archipelago
    Learning Holdings, LLC." Study Island Holdings, LLC through
    July 1, 2009, Archipelago Learning Holdings, LLC from
    July 2, 2009 are referred to herein as "the
    Company."
Purchase
    Transaction
Study Island Holdings, LLC, a Delaware limited liability
    company, and Study Island, LLC, a Delaware limited liability
    company, were formed in December 2006 and had no activities
    prior to January 10, 2007. On January 10, 2007,
    substantially all of the assets of Study Island, LP (the
    "Predecessor"), a Texas partnership, were sold to the
    Company. Periods presented prior to January 10, 2007,
    represent the operations of the Predecessor. The change of
    ownership was approved by all of the managers of the Company.
    The transaction was recorded as a business combination with the
    resulting assets acquired and liabilities assumed being recorded
    at fair value determined on the information available and
    assumptions as to future operations. The partners of the
    Predecessor retained an 18.2% interest in the Company by
    exchanging $20,000,000 of their interests in the Predecessor for
    Class A shares in the Company. Because of the acquisition,
    the resulting purchase accounting of the acquirers has been
    reflected in the accompanying consolidated financial statements.
The purchase price was allocated as follows (amounts in
    thousands):
Working capital
$
(7,053
)
Property and equipment
346
Intangible assets
17,120
Net acquired assets
10,413
Net cash paid to sellers
80,226
Transaction costs
4,560
Total cash paid
84,786
Issuance of Class A shares
20,000
Total purchase price
104,786
Goodwill
$
94,373
F-10
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Contained within the 2007 consolidated financial statements are
    nine calendar days of operations and cash flows of the
    Predecessor. Such amounts are not material to the overall 2007
    consolidated financial statements taken as a whole. Further, the
    consolidated financial position of the Predecessor immediately
    prior to the January 10, 2007, transaction was not
    materially different from that of December 31, 2006.
    Accordingly, the Company has chosen January 1, 2007, as a
    date of convenience in presenting successor operating results
    and the financial statement information for the period from
    January 1, 2007 through January 9, 2007 has not been
    presented separately. All periods ending prior to
    January 1, 2007 are referred to as "Predecessor,"
    and all periods including and after such date are referred to as
    "Successor."
2.
SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
    balances and results of operations of the Company and its wholly
    owned subsidiaries. All intercompany balances and transactions
    have been eliminated in consolidation.
Unaudited Interim Financial Information —
The
    accompanying unaudited interim consolidated balance sheet as of
    June 30, 2009, the consolidated statements of income and
    cash flows for the six months ended June 30, 2008 and 2009,
    and the consolidated statement of changes in members'
    equity for the six months ended June 30, 2009 are
    unaudited. These unaudited interim consolidated financial
    statements have been prepared in accordance with accounting
    principles generally accepted in the United States. In the
    opinion of the Company's management, the unaudited interim
    consolidated financial statements have been prepared on the same
    basis as the audited consolidated financial statements and
    include all adjustments necessary for the fair presentation of
    the Company's balance sheet as of June 30, 2009,
    statements of income, and its cash flows for the six months
    ended June 30, 2008 and 2009. The results for the six
    months ended June 30, 2009 are not necessarily indicative
    of the results to be expected for the year ending
    December 31, 2009. All references to June 30, 2009 or
    to the six months ended June 30, 2008 and 2009 in the notes
    to the consolidated financial statements are unaudited.
Unaudited Pro Forma Presentation
— The pro
    forma balance sheet data as of June 30, 2009 and pro forma
    net income per common share for the six months ended
    June 30, 2009 reflect the conversion of all outstanding
    shares of the Company's Class A,
Class A-2,
Class B and Class C members' equity into an
    aggregate
    of           common
    shares assuming the completion of the initial public officering
    has occurred as of June 30, 2009 and January 1, 2009,
    respectively.
Estimates
— Management uses estimates and
    assumptions in preparing financial statements in accordance with
    accounting principles generally accepted in the United States of
    America. Those estimates and assumptions affect the reported
    amounts of assets and liabilities, the disclosure of contingent
    assets and liabilities, and the reported sales and expenses.
    Accordingly, actual results could differ from the estimates that
    were used. The Company's most significant estimates and
    assumptions include those relating to revenue recognition, stock
    based compensation and valuations of goodwill and intangible
    assets.
Revenue Recognition
— The Company generates
    service revenue from customer subscriptions, which consist of
    standards-based instruction, practice, assessments and
    productivity tools; and individual buys, which are individual
    purchases for access to a product (one subject in a specific
    state for a specific grade level). Training fees, which are fees
    from customers to pay for onsite or online training sessions,
    are also recognized over the subscription period. Subscription
    revenue may be characterized as new subscriptions and sales from
    existing customers. For the years 2006, 2007, and 2008,
    subscription revenue accounted for 97.3%, 98.0%, and 98.4% of
    the Company's service revenue, respectively. For the six
    months ended June 30, 2008 and 2009 (unaudited),
    subscription revenue accounted for 99.1% and 98.4% of the
    Company's service revenue, respectively.
Service revenue is recognized when all of the following
    conditions are satisfied: there is persuasive evidence of an
    arrangement, the service has been provided to the customer, the
    collection of the fees is
F-11
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
reasonably assured, and the amount of the fees to be paid by the
    customer is fixed or determinable. The Company's
    arrangements do not contain general rights of return.
Subscription revenue for new and renewals from existing
    customers are recognized ratably over the subscription terms
    beginning on the commencement dates of each subscription. The
    traditional subscription term is 12 months, and all
    subscriptions are on a noncancelable basis. When additional
    months are offered as a promotional incentive, those months are
    part of the subscription period. As part of their subscriptions,
    customers generally benefit from new features and functionality
    with each release at no additional cost.
Training sessions are offered to the Company's customers in
    conjunction with the subscriptions to train the customers on
    implementing, using, and administering the Study Island
    programs. Training revenue is recognized over the life of the
    subscription. Customer support is provided to customers
    following the sale at no additional charge and at a minimal cost
    per call.
The Company defers the total amount of the sale of
    subscriptions, training, and support as deferred revenue when
    the customer is invoiced and recognizes the revenue on a
    straight-line basis over the subscription period. The Company
    does not incur significant up-front costs related to providing
    its products and services and therefore has not deferred any
    expenses.
Cost of Revenue
— Cost of revenue consists of
    the direct and indirect costs to host and make available its
    products and services to our customers. A significant portion of
    the cost of revenue includes salaries, bonuses, stock-based
    compensation and employee benefit costs and taxes related to
    engineering personnel who maintain the Company's servers
    and technical equipment and work on our web-based hosted
    platform. The employee benefits costs and taxes are allocated
    based upon a percentage of total compensation expense. Other
    direct and indirect costs include recruiting and relocation fees
    associated with engineering employees, contracted labor,
    facility costs for the Company's web platform servers and
    routers, including backup servers that are maintained in
    colocation facilities in Dallas, Texas, depreciation expense on
    those servers and routers, network monitoring costs and
    amortization of Study Island's technical development
    intangible assets.
Operating Expenses
— Operating expenses consist
    of sales and marketing, content development and general and
    administrative expenses. Sales and marketing expense consists
    primarily of salaries, commissions, benefits and stock-based
    compensation for sales and marketing personnel for the
    Company's inside and outside sales team, marketing,
    customer service, training and account management. Sales and
    marketing also includes direct marketing costs, travel and
    entertainment and amortization of customer relationship
    intangible assets. Content development expense consists
    primarily of salaries, benefits and stock-based compensation for
    employees who are responsible for writing the questions for the
    Company's products and amortization of content intangible
    asset. General and administrative expense consists primarily of
    salaries, benefits and stock-based compensation for general and
    administrative employees that includes executives, finance and
    accounting, human resources, customer relations and order
    management. General and administrative also includes accounting
    and legal professional services fee, rent, insurance, travel and
    entertainment expense, depreciation and other corporate expenses.
Software Development Costs
— Software
    development costs are accounted for in accordance with the
    Financial Accounting Standards Board (FASB) Statement
    No. 86,
Accounting for the Costs of Computer Software to
    Be Sold, Leased, or Otherwise Marketed,
which establishes
    the standards of financial accounting and reporting for the cost
    of computer software to be sold, leased, or otherwise marketed
    as a separate product or as part of a product or process,
    whether internally developed or purchased. The cost of the core
    web-based delivery technology and content was recognized upon
    the Company's acquisition in accordance with purchase
    accounting and is being amortized over 10 years. The
    Company is continually improving, upgrading, and enhancing both
    the content delivered to its customers and the software used to
    deliver this content and, as such, these costs are being
    expensed as incurred.
F-12
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ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Cash and Cash Equivalents
— Cash and cash
    equivalents include highly liquid short-term investments
    purchased with original maturities of three months or less.
Accounts Receivable
— The Company carries its
    accounts receivable at cost, less an allowance for doubtful
    accounts, which is based on management's assessment of the
    collectability of accounts receivable. The Company extends
    unsecured credit to its customers in the ordinary course of
    business, but mitigates the associated credit risk by performing
    ongoing credit evaluations of its customers. The vast majority
    of the Company's customers are public schools, which
    receive their funding from the local, state and federal
    government. The Company evaluates the adequacy of the allowance
    for doubtful accounts based on a specific customer review of the
    outstanding accounts receivables.
The following table summarizes the changes in the Company's
    allowance for doubtful accounts for the respective periods
    (amounts in thousands):
Predecessor
Successor
Year Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
2006
2007
2008
Allowance for doubtful accounts:
Beginning balance
$
—
$
—
$
38
Charged to costs and expenses
2
38
71
Deductions — accounts written off
(2
)
—
(20
)
Ending balance
—
38
89
The allowance for doubtful account as of June 30, 2009
    (unaudited) is $91,599.
Property and Equipment
— Property and equipment
    are recorded at cost, less accumulated depreciation.
    Depreciation on property and equipment is provided in amounts
    sufficient to relate the cost of the assets to operations over
    their estimated service lives using the straight-line method.
Useful Lives
Furniture and fixtures
Seven years
Office equipment
Five years
Computer equipment
Three to five years
Computer software
Three years
Leasehold improvements
Shorter of the estimated useful life or the lease term
Major repairs or replacements of property and equipment are
    capitalized. Maintenance repairs and minor replacements are
    charged to operations as incurred. Equipment retirements are
    removed from the records at their cost and related accumulated
    depreciation and any resulting gain or loss is included in
    earnings.
Goodwill, Intangible Assets and Long-Lived
    Assets
— Goodwill represents the excess of the
    cost of an acquisition over the fair value of net assets
    acquired. In accordance with FASB Statement No. 142,
Goodwill and Other Intangible Assets
, goodwill is
    assessed for impairment at the reporting unit level at least
    annually or more frequently when events and circumstances occur
    indicating that the recorded goodwill may be impaired. The first
    step of the impairment test requires the identification of the
    reporting units, and comparison of the fair value of each of
    these reporting units to the respective carrying value. The fair
    value of the reporting units is determined based on valuation
    techniques using the best information that is available, such as
    discounted cash flow projections. If the carrying value is less
    than the fair value, no impairment exists and the second step is
    not performed. If the carrying value is higher than the fair
    value, there is an indication that impairment may exist and the
    second step must be performed to compute the amount of the
    impairment.
F-13
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ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
In the second step, the impairment is computed by comparing the
    implied fair value of reporting unit goodwill with the carrying
    amount of that goodwill. The annual impairment tests are
    performed in the fourth quarter of each year. No goodwill
    impairment was identified in 2007 or 2008.
Intangible assets and other long-lived assets are reviewed for
    impairment when events or changes in circumstances indicate the
    carrying amount may not be recoverable, in accordance with FASB
    Statement No. 144,
Accounting for Impairment or Disposal
    of Long-Lived Assets
. If impairment indicators exist, an
    assessment of undiscounted future cash flows to be generated by
    such assets is made. If the results of the analysis indicate
    impairment, the assets are adjusted to fair market value.
    Intangible assets with finite lives are amortized using the
    straight-line method over their estimated useful lives. No
    intangible or long-lived assets impairment loss was identified
    in 2006, 2007 or 2008.
Deferred Financing Costs
— Deferred financing
    costs are incurred to obtain long-term financing and are
    amortized using the effective interest method over the term of
    the related debt. The amortization of deferred financing costs,
    which are classified in interest expense in statement of income,
    was $0, $35,543 and $179,338 for the years ended
    December 31, 2006, 2007 and 2008, respectively and $81,498
    and $101,089 for the six months ended June 30, 2008 and
    2009 (unaudited), respectively.
Income Taxes
— The Company is treated as a
    partnership and, is not a taxpaying entity for federal income
    tax purposes. As a result, the Company's income is taxed to
    its members in their individual federal income tax returns. The
    Company's wholly owned subsidiary, TeacherWeb, Inc.
    ("TeacherWeb") is a taxpaying entity for federal
    income tax purposes. A net long-term tax liability of $853,000
    was recorded when TeacherWeb was acquired in June 2008. As a
    result of TeacherWeb's operations since the acquisition,
    the Company has recorded $247,000 of federal and state income
    tax benefit in 2008. No federal income tax expense was
    recognized in 2006 or 2007. TeacherWeb has approximately
    $364,000 of net operating loss carryforwards for federal and
    state income tax purposes as of December 31, 2008. The
    Company is also subject to sales, use and franchise taxes and,
    as such, has recorded these expenses in the accompanying
    financial statements.
Concentrations of Credit Risk
— Financial
    instruments that are subject to concentrations of credit risk
    are cash and cash equivalents and accounts receivable.
    Management believes its contract acceptance, billing, and
    collection policies are adequate to minimize potential credit
    risk. The Company continuously evaluates the credit worthiness
    of its customers' financial condition and generally does
    not require collateral.
The Company maintains deposits with major financial institutions
    which exceed federally insured limits. Management periodically
    assesses the financial condition of the institution and believes
    that any possible credit risk is minimal. The Company has not
    experienced any loss from such risk.
Stock-Based Compensation Expense
— The Company
    has adopted FASB Statement No. 123(R),
Accounting for
    Stock-Based Compensation
. Among other items, FASB Statement
    No. 123(R) requires companies to record compensation
    expense for share-based awards issues to employees and directors
    in exchange for services provided. The amount of the
    compensation expense is based on the estimated fair value of the
    awards on their grant dates determined by the board of managers
    (see Note 12) and is recognized over the required
    service periods. The share-based awards include members'
    interest in Class B and C shares.
Accounting for Derivatives and Hedging
    Activities
— The Company's overall risk
    management strategy includes utilizing an interest rate swap
    agreement. The Company managed its exposure to rate variability
    on the floating interest rate paid on its borrowing by entering
    into an interest rate swap agreement with a notional amount
    totaling $45,500,000, of which $45,500,000 and $40,500,000
    remained in effect as of December 31, 2008 and
    June 30, 2009, respectively. Beginning in 2009, the
    notional amount of the interest rate swap began decreasing in
    periodic amounts, and will decrease to a notional amount of
    $30,500,000 at the December 2010 termination date. The Company
    swapped a floating rate payment based on three month
F-14
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
London InterBank Offered Rate (LIBOR) for a fixed rate of 4.035%
    in order to minimize the variability in expected future cash
    flows due to interest rate movements on its LIBOR-based variable
    rate debt.
The Company has not designated the swap as a hedge in accordance
    with FASB Statement No. 133,
Accounting for Derivative
    Instruments and Hedging Activities
, as amended. The fair
    value of the interest rate swap is recorded in its consolidated
    balance sheet as "interest rate swap" and changes in
    the fair value of the swap in its consolidated statements of
    income as "derivative loss."
Net Income per Share
— Net income per equity
    share is computed under the provisions of FASB
    Statement No. 128,
Earnings Per Share
. Basic
    income per share is computed using net income and the weighted
    average number of shares outstanding. Diluted earnings per share
    reflect the weighted average number of shares outstanding plus
    any potentially dilutive securities outstanding during the
    period. Class A,
Class A-2,
Class B, and Class C shares are entitled to earnings
    based on a priority established in the Company's LLC
    agreement. The Class A shares are entitled to a return of
    capital and a preferred return before any other class of share
    is entitled to earnings. Class A and
Class A-2
shares are entitled to 100% of the earnings for the years ended
    December 31, 2007 and 2008, and the six months ended
    June 30, 2008 and 2009, to the extent such shares were
    issued. For the years ended December 31, 2006, 2007, and
    2008, and for the six months ended June 30, 2008 and 2009,
    there were no potential dilutive securities to the Class A
    shares. Prior to the purchase transaction, the Predecessor was a
    limited partnership containing two equal partners and the
    Predecessor reported earnings per partner by dividing net income
    for the year ended December 31, 2006 by two.
3.
FAIR
    VALUE MEASUREMENTS
In the first quarter of 2008, the Company adopted the provisions
    of FASB Statement No. 157,
Fair Value Measurements,
for financial assets and liabilities. FASB Statement
    No. 157 became effective for financial assets and
    liabilities on January 1, 2008. FASB Statement No. 157
    defines fair value, thereby eliminating inconsistencies in
    guidance found in various prior accounting pronouncements and
    increases disclosures surrounding fair value calculations.
FASB Statement No. 157 establishes a three-tiered fair
    value hierarchy that prioritizes inputs to valuation techniques
    used in fair value calculations. The three levels of input are
    defined as follows:
•
Level 1 — Unadjusted quoted market prices for
    identical assets or liabilities in active markets that the
    Company has the ability to access.
•
Level 2 — Quoted prices for similar assets or
    liabilities in active markets; quoted prices for identical or
    similar assets or liabilities in inactive markets; or valuations
    based on models where the significant inputs are observable
    (interest rates, yield curves, prepayment speeds, default rates,
    loss severities, etc.) or can be corroborated by observable
    market data.
•
Level 3 — Valuations based on models where
    significant inputs are not observable. The unobservable inputs
    reflect the Company's own assumptions about the assumptions
    that market participants would use.
FASB Statement No. 157 requires the Company to maximize the
    use of observable inputs and minimize the use of unobservable
    inputs. If a financial instrument uses inputs that fall in
    different levels of the hierarchy, the instrument will be
    categorized based upon the lowest level of input that is
    significant to the fair value calculation.
The Company's interest rate swap is valued in the market
    using discounted cash flow techniques. These techniques
    incorporate Level 1 and Level 2 inputs such as
    interest rates. These market inputs are utilized in the
    discounted cash flow calculation considering the
    instrument's term, notional amount, discount
F-15
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
rate, and credit risk. Significant inputs to the derivative
    valuation for interest rate swap are observable in the active
    markets and are classified as Level 2 in the hierarchy.
The following table summarizes assets and liabilities measured
    at fair value on a recurring basis as of December 31, 2008,
    as required by FASB Statement No. 157 (amounts in
    thousands):
Level 1
Level 2
Level 3
Total
Assets — cash equivalents
$
12,206
—
—
$
12,206
Liabilities — interest rate swap
—
$
1,988
—
$
1,988
The following table summarizes assets and liabilities measured
    at fair value on a recurring basis as of June 30, 2009
    (unaudited), as required by FASB Statement No. 157 (amounts
    in thousands):
Level 1
Level 2
Level 3
Total
Assets — cash equivalents
$
14,408
—
—
$
14,408
Liabilities — interest rate swap
—
$
1,574
—
$
1,574
The fair value of the Company's long-term debt is estimated
    based on the quoted market prices for the same or similar issues
    or on the current rates offered to the Company for debt of the
    same remaining maturities.
The carrying amounts and estimated fair values of the
    Company's financial instrument that is not reflected in the
    financial statement at fair value is as follows (amounts in
    thousands):
December 31, 2007
December 31, 2008
June 30, 2009 (Unaudited)
Carrying
Carrying
Carrying
Amount
Fair Value
Amount
Fair Value
Amount
Fair Value
Term loan
$
70,000
$
70,000
$
69,300
$
70,047
$
68,426
$
67,912
4.
RECENT
    ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued FASB Statement
    No. 141(R),
Business Combinations,
which establishes
    principles and requirements for how an acquirer recognizes and
    measures in its financial statements the identifiable assets
    acquired, the liabilities assumed, non-controlling interest in
    the acquire, and the goodwill acquired. FASB Statement No.
    141(R) also establishes disclosure requirements to enable the
    evaluation of the nature and financial effects of the business
    combination. FASB Statement No. 141(R) is effective for
    financial statements issued for fiscal years beginning after
    December 15, 2008, and early adoption is prohibited. The
    implementation of this standard did not have a material effect
    on the Company's financial condition or results of
    operations. The Company will assess the impact of this standard
    when and if future acquisitions occur.
In February 2008, the FASB issued FASB Staff Position
    ("FSP")
FAS No. 157-2,
Effective Date for FASB Statement No. 157. This FSP
    permitted the delayed application of FSAB Statement No. 157
    for all nonrecurring fair value measurements of nonfinancial
    assets and nonfinancial liabilities until fiscal years beginning
    after November 15, 2008. The adoption did not have a
    material impact on the Company's consolidated financial
    statements.
In March 2008, the FASB issued FASB Statement No. 161,
Disclosures about Derivative Instruments and Hedging
    Activities — an amendment of FASB Statement 133
.
    FASB Statement No. 161 requires enhanced disclosures about
    a company's derivative and hedging activities. These
    enhanced disclosures will discuss (a) how and why a company
    uses derivative instruments, (b) how derivative instruments
    and related hedged items are accounted for under FASB Statement
    No. 133 and its related interpretations, and (c) how
    derivative instruments and related hedged items affect a
    company's financial position, results of operations, and
    cash flows. FASB Statement No. 161 is effective for fiscal
    years beginning on or after November 15, 2008, with
F-16
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
earlier adoption allowed. The implementation of this standard
    did not have a material effect on the Company's
    consolidated financial condition or results of operations for
    interim periods beginning January 1, 2009.
In April 2008, the FASB issued FSP
No. 142-3,
Determination of the Useful Life of Intangible Assets
.
    FSP FASB
No. 142-3
amends the factors that should be considered in developing
    renewal or extension assumptions used to determine the useful
    life of a recognized intangible asset under FASB Statement
    No. 142. FSP FASB
No. 142-3
is effective for fiscal years beginning after December 15,
    2008. The implementation of this standard did not have a
    material effect on the Company's consolidated financial
    condition or results of operations.
In April 2009, the FASB issued FSP
No. FAS 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial Instruments
    ("FSP
FAS 107-1
and APB
28-1").
This FSP amends FASB Statement No. 107, Disclosures
    about Fair Value of Financial Instruments, to require
    disclosures about fair value of financial instruments in interim
    as well as in annual financial statements. This FSP also amends
    Accounting Principles Board ("APB") Opinion
    No. 28, Interim Financial Reporting, to require those
    disclosures in all interim financial statements. FSP
No. FAS 107-1
and APB
28-1
were effective for interim and annual periods ending after
    June 15, 2009.
In May 2009, the FASB issued FASB Statement No. 165,
    Subsequent Events ("SFAS 165"). This statement
    provides general standards for the accounting and reporting of
    subsequent events that occur between the balance sheet date and
    issuance of financial statements. The statement requires the
    issuer to recognize the effects, if material, of subsequent
    events in the financial statements if the subsequent event
    provides additional evidence about conditions that existed as of
    the balance sheet date. The issuer must also disclose the date
    through which subsequent events have been evaluated and the
    nature of any non-recognized subsequent events. Non-recognized
    subsequent events include events that provide evidence about
    conditions that did not exist as of the balance sheet date, but
    which are of such a nature that they must be disclosed to keep
    the financial statements from being misleading. The statement is
    effective for interim and annual periods ending after
    June 15, 2009. The Company has considered subsequent events
    through September 2, 2009 related to these financial
    statements.
In June 2009, the FASB issues FASB Statement No. 168,
The "FASB Accounting Standards Codification" and
    the Hierarchy of Generally Accepted Accounting
    Principles — a replacement of FASB Statement
    No. 162
. FASB Statement 168 provides for the FASB
    Accounting Standards Codification (the "Codification")
    to become the single official source of authoritative,
    nongovernmental U.S. generally accepted accounting
    principles (GAAP). The Codification did not change GAAP but
    reorganizes the literature. FASB Statement 168 is effective for
    interim and annual periods ending after September 15, 2009.
    The Company will begin to use the Codification when referring to
    GAAP in its financial statements for the third quarter of 2009.
    This will not have an impact on the Company's financial
    position, results of operations of cash flows.
F-17
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
5.
PROPERTY
    AND EQUIPMENT
Property and equipment as of December 31, 2007, 2008 and
    June 30, 2009, consisted of the following (amounts in
    thousands):
As of June 30,
2007
2008
2009
(Unaudited)
Computer equipment
$
650
$
1,534
$
1,896
Furniture and fixtures
129
284
302
Office equipment
6
13
13
Computer software
109
363
471
Leasehold improvements
—
47
60
894
2,241
2,742
Accumulated depreciation
(101
)
(459
)
(961
)
Total
$
793
$
1,782
$
1,781
Depreciation expense was $71,004, $101,165, and $358,334 for the
    periods ending December 31, 2006, 2007 and 2008,
    respectively. For the six months ended June 30, 2008 and
    2009 (unaudited), depreciation expense was $136,279 and
    $501,689, respectively.
6.
ACQUISITIONS
On June 30, 2008, the Company purchased 100% of the capital
    stock of TeacherWeb. TeacherWeb provides web-based templates for
    educators to quickly and easily create classroom, school and
    district websites. The transaction was recorded as a business
    combination with the resulting assets acquired and liabilities
    assumed being recorded at fair value determined on the
    information available and assumptions as to future operations.
The purchase price was allocated as follows (amounts in
    thousands):
Working capital
$
(17
)
Property and equipment
4
Net long-term deferred tax liability
(853
)
Intangible assets
2,380
Net acquired assets
1,514
Net cash paid to sellers
9,408
Transaction costs
250
Total cash paid
9,658
Issuance of
Class A-2 shares
750
Total purchase price
10,408
Goodwill
$
8,894
The fair value of the 286,882
Class A-2 shares
issued during the third quarter of 2008 in connection with the
    TeacherWeb acquisition was determined based on management's
    estimated average enterprise value of the Company at the time of
    the acquisition and its impact on its existing participation
    shares distribution thresholds.
F-18
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
7.
INTANGIBLE
    ASSETS AND GOODWILL
The Company has recorded intangible assets in connection with
    the purchase transaction on January 10, 2007. Intangible
    assets are amortized on a straight-line basis over their
    estimated useful lives. Intangible assets as of
    December 31, 2007, are as follows (dollars in thousands):
Amortization
Gross
Period
Carrying
Accumulated
(Months)
Amount
Amortization
Net
Finite-lived intangible assets:
Study Island customer relationships
120
$
13,620
$
(1,325
)
$
12,295
Study Island technical development/program content
120
2,500
(244
)
2,256
Indefinite-lived intangible assets — Study Island
    trade name
1,000
—
1,000
Total intangible assets
$
17,120
$
(1,569
)
$
15,551
Amortization expense for the year ended December 31, 2007,
    was $1,568,666, and $81,741, $1,325,387 and $161,538 of
    amortization expense were included in cost of revenue, sales and
    marketing and content development expense, respectively.
In addition, the Company has recorded intangible assets in
    connection with its June 30, 2008, acquisition of
    TeacherWeb. Intangible assets as of December 31, 2008, are
    as follows (dollars in thousands):
Amortization
Gross
Period
Carrying
Accumulated
(Months)
Amount
Amortization
Net
Finite-lived intangible assets:
Study Island customer relationships
120
$
13,620
$
(2,687
)
$
10,933
Study Island technical development/program content
120
2,500
(494
)
2,006
TeacherWeb customer relationships
60
2,130
(213
)
1,917
Indefinite-lived intangible assets:
Study Island trade name
1,000
—
1,000
TeacherWeb trade name
250
—
250
Total intangible assets
$
19,500
$
(3,394
)
$
16,106
Amortization expense for the year ended December 31, 2008
    was $1,825,000, and $84,000, $1,575,000 and $166,000 of
    amortization expense were included in cost of revenue, sales and
    marketing and content development expense, respectively.
F-19
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Intangible assets as of June 30, 2009 (unaudited), are as
    follows (dollars in thousands):
Amortization
Gross
Period
Carrying
Accumulated
(Months)
Amount
Amortization
Net
Finite-lived intangible assets:
Study Island customer relationships
120
$
13,620
$
(3,368
)
$
10,252
Study Island technical development/program content
120
2,500
(619
)
1,881
TeacherWeb customer relationships
60
2,130
(426
)
1,704
Indefinite-lived intangible assets:
Study Island trade name
1,000
—
1,000
TeacherWeb trade name
250
—
250
Total intangible assets
$
19,500
$
(4,413
)
$
15,087
Amortization expense for the six month period ended
    June 30, 2009 (unaudited) was $1,019,000, and $42,000,
    $894,000 and $83,000 of amortization expense was included in
    cost of revenue, sales and marketing and content development
    expense, respectively.
The estimated amortization expense for each of the five
    succeeding years and thereafter is as follows (amounts in
    thousands):
As of
As of
December 31, 2008
June 30, 2009
(Unaudited)
2009
$
2,038
$
1,019
2010
2,038
2,038
2011
2,038
2,038
2012
2,038
2,038
2013
1,825
1,825
Thereafter
4,879
4,879
$
14,856
$
13,837
The weighted-average remaining useful lives of the finite
    intangibles assets as of December 31, 2008 and
    June 30, 2009 (unaudited) is 8.42 and 7.80 years,
    respectively.
The changes in the carrying amount of goodwill are as follows
    (amounts in thousands):
Balance at January 1, 2007
$
—
Goodwill acquired during year
94,373
Balance at December 31, 2007
94,373
Goodwill acquired during year
8,894
Balance at December 31, 2008
$
103,267
There was no change in goodwill during the six months ended
    June 30, 2009 (unaudited).
F-20
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
8.
CREDIT
    FACILITY
On November 16, 2007, the Company entered into an
    $80,000,000 credit facility with General Electric Capital
    Corporation, as agent, composed of a $70,000,000 term loan and a
    $10,000,000 revolving credit facility, which expires in November
    2013. The proceeds of the term loan and $4,928,688 in cash were
    used to pay a distribution of $73,222,670 to the Class A
    shareholders and debt financing costs of $1,706,018. The term
    loan bears interest at rates based upon either a base rate or
    LIBOR rate plus an applicable margin (3.25% as of June 30,
    2009, 3.25% as of December 31, 2008, and 4.00% as of
    December 31, 2007, respectively, in each case for a
    LIBOR-based term loan) determined based on the Company's
    leverage ratio. Amounts under the revolving credit facility can
    be borrowed and repaid, from time to time, at the Company's
    option, subject to the pro forma compliance with certain
    financial covenants. Subsequently, the Company received a refund
    of $215,270 in 2008 of the amount previously paid.
The term loan and revolving credit facility require us to
    maintain certain financial ratios, including a leverage ratio
    (based on the ratio of consolidated indebtedness, net of cash
    and cash equivalents, to consolidated EBITDA, defined in the
    credit facility as consolidated net income adjusted by adding
    back interest expense, taxes, depreciation expenses,
    amortization expenses and certain other non-recurring or
    otherwise permitted fees and charges), an interest coverage
    ratio (based on the ratio of consolidated EBITDA to consolidated
    interest expense, as defined in the credit facility) and a fixed
    charge coverage ratio (based on the ratio of consolidated EBITDA
    to fixed charges).
The term loan and the revolving credit facility contain certain
    affirmative and restrictive covenants that, among other things,
    add limitations for the incurrence of additional indebtedness,
    liens on property, sale and leaseback transactions, investments,
    loans and advances, merger or consolidation, asset sales,
    acquisitions, dividends, transactions with affiliates,
    prepayments of any other indebtedness, modifications of our
    organizational documents and restrictions on our subsidiaries.
    The credit facility contains events of default that are
    customary for similar facilities and transactions, including a
    cross-default provision with respect to any other indebtedness
    and an event of default that would be triggered by a change of
    control, as defined in the credit facility, and which is not
    expected to be triggered by this offering. As of June 30,
    2009, December 31, 2008 and December 31, 2007, we were
    in compliance with all covenants. The credit facility is secured
    on a first-priority basis by security interests (subject to
    permitted liens) in substantially all of the assets of the
    Company.
The Company has the right to optionally prepay its borrowings
    under the term loan or the revolving credit facility, subject to
    the procedures set forth in the credit facility. The Company may
    be required to make prepayments on its borrowings under the term
    loan or the revolving credit facility if it receives proceeds as
    a result of any asset sales, additional debt issuances, events
    of loss or if we have excess cash flow. A mandatory prepayment
    of the term loan is required within five business days after the
    earlier of the actual or required delivery date of the
    compliance certificate each fiscal year, in an amount equal to
    (i) 75% of excess cash flows (as defined by the credit
    agreement) if the leverage ratio as of the last day of the
    fiscal year is greater than 4:00 to 1:0, (ii) 50% of excess
    cash flows if the leverage ratio as of the last day of the
    fiscal year is less than or equal to 4:00 to 1:0 but greater
    than 3:25 to 1:0, or (iii) 25% of excess cash flow if the
    leverage ratio as of the last day of the fiscal year is less
    than or equal to 3.25 to 1.0. No mandatory prepayment is
    required if the leverage ratio is less than or equal to 2.50 to
    1.0 on the last day of the fiscal year. No mandatory prepayments
    were required for the second quarter ended June 30, 2009
    and the year ended December 31, 2007. The Company did make
    a mandatory prepayment of $524,301 during the second quarter of
    2009 related to the excess cash flow generated for the year
    ended December 31, 2008.
F-21
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ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Principal payments due over the next five years and beyond as of
    December 31, 2008 and June 30, 2009, are as follows
    (amounts in thousands):
As of December 31, 2008
As of June 30, 2009
Calendar Year
Term
Revolving
Total
Term
Revolving
Total
(unaudited)
2009
$
700
$
—
$
700
$
350
$
—
$
350
2010
700
700
700
700
2011
700
700
700
700
2012
700
700
700
700
2013
66,500
66,500
65,976
65,976
Total debt
69,300
69,300
68,426
68,426
Less: current maturities
(700
)
(700
)
(700
)
(700
)
Total long-term debt
$
68,600
$
—
$
68,600
$
67,726
$
—
$
67,726
9.
OTHER
    LONG-TERM LIABILITY
The Financial Accounting Standards Board issued FASB
    Interpretation No. 48, "Accounting for Uncertainty in
    Income Taxes - an Interpretation of FASB Statement
    No. 109", or FIN 48, which clarifies the
    accounting and disclosure for uncertainty in tax positions, as
    defined. The Company adopted the provisions of FIN 48 as of
    January 1, 2007, and has analyzed filing positions in all
    of the federal and state jurisdictions where the Company is
    required to file income tax returns, as well as all open tax
    years in these jurisdictions. The Company is not a taxpaying
    entity for federal income tax purposes and in certain state tax
    jurisdictions due to the Company's partnership status. As a
    partnership, income of the Company is taxed to the partners on
    their individual federal income tax returns. The Company's
    policy is to recognize interest accrued related to unrecognized
    tax benefits and penalties as income tax expense.
Upon adoption, the Company did not identify uncertain tax
    positions that resulted in a material effect on the
    Company's financial condition, results of operations, or
    cash flow. The Company did not record a cumulative effect
    adjustment related to the adoption of FIN 48. In addition,
    no material reserves for uncertain income tax positions were
    identified or recorded pursuant to FIN 48 as of
    December 31, 2007 and December 31, 2008.
In the six months ended June 30, 2009 (unaudited), the
    Company recorded $230,000 of unrecognized tax benefits including
    approximately $7,000 of accrued gross interest expense related
    to a state tax filing position. The Company is not currently
    under examination in any federal or state income tax
    jurisdiction. The Company does not expect that unrecognized tax
    benefits will significantly change in the following
    12 month period.
10.
COMMITMENTS
    AND CONTINGENCIES
The Company is obligated, as lessee, under noncancelable
    operating leases for office space expiring on February 28,
    2010, and May 31, 2012. In addition, the Company is
    obligated, as lessee, under a noncancelable operating lease for
    office equipment in July 2011. As of December 31, 2008 and
    June 30, 2009,
F-22
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ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
the future minimum payments required under all operating leases
    with terms in excess of one year are as follows (amounts in
    thousands):
As of
As of
December 31, 2008
June 30, 2009
(Unaudited)
2009
$
462
$
271
2010
415
434
2011
414
424
2012
176
176
$
1,467
$
1,305
Rent expense for the years ended December 31, 2006, 2007
    and 2008, was $85,896, $248,159, and $423,723, respectively.
    Rent expense was $203,127 and $270,060 for the six months ended
    June 30, 2008 and 2009 (unaudited), respectively.
11.
MEMBERS'
    EQUITY
Archipelago Learning Holdings, LLCs' capital structure
    consists of Class A Shares,
Class A-2 Shares,
Class B Shares and Class C Shares. The terms of the
    shares are governed by the Amended and Restated Limited
    Liability Company (the "LLC Agreement"), as amended.
    On January 10, 2007, 109,545,064 Class A Shares were
    issued to the Company's private-equity sponsor and other
    investors. Class B Shares and Class C Shares are held
    by employees of the Company.
In February 2007 the Board of Managers of Archipelago Learning
    Holdings, LLC adopted the 2007 Equity Compensation Plan (the
    "Plan"). Under the terms of the Plan, eligible
    participants, as determined by the Board, may receive grants of
    equity interests of the Archipelago Learning Holdings, LLC in
    the form of Class B Shares and Class C Shares, which
    together are defined as the Participation Shares. The purpose of
    the Plan is to compensate employees and consultants of the
    Company. Under the terms and provisions of the LLC Agreement the
    Participation Shares are to be considered profits interests in
    the Company and each holder of a share is considered a member of
    the Company.
Holders of Class B Shares and Class C Shares may not
    sell, transfer, assign, pledge or otherwise dispose of their
    shares other than as permitted pursuant to the Participation
    Stock Agreement. In the event of a planned sale of shares by the
    Company's private-equity sponsor, holders of vested
    Participation Shares must participate in the planned sale.
A separate capital account must be maintained for each member.
    No member can be required to pay the Company or another member
    if their capital accounts are negative.
Distributions
All members shall be entitled to receive distributions,
    including distributions in connection with the liquidation,
    dissolution or winding up of the Company, when and as determined
    by the Board of Managers. Distributions under the plan are
    determined by the Board and are subject to various thresholds
    outlined in the LLC Agreement. No holder of a Participation
    Share is eligible to receive distributions under the Agreement
    until the holders of the Class A and Class A-2 Shares
    have received distributions equal to 100% of their capital
    contributions and the holders of Class A shares have
    received a preferred return of 12% per annum on the Class A
    capital contributions. Once these distributions have been made,
    the Class A Shareholders and holders of
Class A-2
and vested Participant Shares become eligible to receive
    distributions subject to cumulative percent limitations. No
    distribution can be made on account of a Class B Share that
    has not yet vested. Amounts that would otherwise be paid on
    account of these shares are credited to the member's
    capital
F-23
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ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
accounts and will be distributed once these shares have vested.
    The Class C Shares are not entitled to any portion of any
    distributions until the holders of the Class A and
Class A-2 Shares
have received certain multiples of cash-based returns on their
    respective investment in the Class A and
Class A-2 Shares.
If any unvested shares are forfeited such amounts will be
    distributed to the Class A and
Class A-2
Members, pro rata, in proportion to the number of shares held by
    Class A and
Class A-2
Members.
Voting
    Rights
All holders of Class A and
A-2 Shares
are entitled to one vote for each Class A and
A-2 Shares
outstanding and the holders of the Participation Shares do not
    have any voting rights.
During 2006, the Predecessor withdrew $6,354,291 from the
    business as a return of capital, and during 2007 withdrew
    $846,483 prior to the change in control to the Successor.
During 2007, the Predecessor received a distribution of
    $1,178,000 representing a return of capital. The Company also
    made a $74,752,848 distribution to Class A members as a
    return of capital that was primarily funded from the proceeds of
    the term loan. The Company did not make any tax distributions to
    the members as the Company was in a tax loss position for the
    years ended December 31, 2007 and December 31, 2008.
    During the six months ended June 30, 2009 (unaudited), the
    Company made a tax distribution of $768,126 to its members.
During 2007, 5,720,692 Class B and 5,720,692 Class C
    shares were issued to employees of the Company. During 2008,
    456,336 Class B and Class C shares were issued to
    employees of the Company. In addition, during 2008, 821,588
    Class B shares and 273,864 Class C shares were
    forfeited. In January 2009, 673,287 shares of Class B
    shares and 673,287 shares of Class C shares were
    issued to employees of the Company.
During 2008, 286,882 of
Class A-2 shares
were issued for $750,000 in connection with the TeacherWeb, Inc.
    acquisition (see Note 6).
12.
STOCK-BASED
    COMPENSATION
Awards under the Plan to eligible participants are based upon
    the terms and conditions determined by the Board as set forth by
    the Board in a grant instrument. These terms may include such
    factors as the number of shares awarded and the dates and events
    on which any or all of the awards vest or become non-forfeitable.
For the awards granted in 2007, 2008 and 2009, each Class B
    Share vests 20% on each anniversary as specified in the
    Participation Stock Agreement and the Class C Shares vest
    upon grant date. For each Class B Share granted to a
    participant, the participant also received one Class C
    Shares.
All Class C shares and any unvested Class B shares
    will be forfeited if any participant is no longer an employee of
    the Company. All Class B and Class C shares will be
    forfeited if the participant's employment is terminated by
    the Company for cause or by the participant without good reason.
Under FASB Statement No. 123(R) and in accordance with the
    guidance in the AICPA Practice Aid
Valuation of
    Privately-Held-Company Equity Securities Issued as
    Compensation
, the estimated fair value of the awards was
    determined by the Company's board of managers after taking
    into account (i) the nature of the business and the history
    of the Company's business from its inception, (ii) the
    economic outlook in general and the condition and outlook of the
    Company's industry, (iii) the book value of the stock
    and financial condition of the Company, (iv) Company's
    earning capacity, (v) Company's dividend-paying
    capacity, (vi) Company's goodwill or other intangible
    value, (vii) prior sales of the Company's equity and
    the size of the block to be valued and (viii) the market
    price of stock in corporations engaged in similar businesses,
    whose stock is actively traded in a free and open market. The
    Company valued the awards primarily based on a comparison to
    similar businesses, business ownership interests or securities
    that have been sold. The
F-24
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Company evaluated pricing multiples derived from transactions of
    companies in the same or a similar line of business and also
    derived from market prices of stocks of companies in the same or
    similar line of business as the Company. The Company focused on
    transactions that involved companies engaged in educational
    services that were technology based.
The assumptions used in calculating the fair value of
    equity-based payment awards represent management's best
    estimates. As with all estimates, these estimates involve
    inherent uncertainties and the application of management
    judgment.
Based on the above factors the Company has determined the fair
    value of its Class B and Class C shares granted in
    2007 was $0.31 and $0.05, respectively, Class B and
    Class C shares granted in 2008 was $0.29 and $0.07,
    respectively and Class B and Class C shares granted in
    2009 was $0.26 and $0.06, respectively. The Company recognizes
    compensation expense as the fair value of the awards on the
    grant date over the service period of the awards which is
    generally the vesting period. The Company did not apply a
    forfeiture rate to the Class B shares as these awards are
    only granted to a few key executives.
The following table presents the status of the Company's
    unvested Class B Participation Shares for the periods
    indicated (amounts in thousands, except per share data):
Weighted-
Average
Grant-Date
Nonvested Shares
Shares
Fair Value
Nonvested — December 31, 2006
—
—
Granted
5,721
$
0.31
Vested
—
—
Forfeited
—
—
Nonvested — December 31, 2007
5,721
0.31
Granted
456
0.29
Vested
(1,089
)
0.31
Forfeited
(822
)
0.31
Nonvested — December 31, 2008
4,266
$
0.31
Granted
673
0.26
Vested
(1,180
)
0.31
Forfeited
—
—
Nonvested — June 30, 2009 (unaudited)
3,759
$
0.30
The following table sets forth the stock-based compensation
    expense included in the related statements of income line items
    (amounts in thousands):
Year Ended
Year Ended
Year Ended
Six Months Ended
Six Months Ended
December 31, 2006
December 31, 2007
December 31, 2008
June 30, 2008
June 30, 2009
(Unaudited)
(Successor)
(Predecessor)
Cost of revenue
$
—
$
17
$
7
$
4
$
52
Sales and marketing
—
81
32
22
26
General and administrative
—
513
298
151
127
Content development
—
20
18
10
7
Total
$
—
$
631
$
355
$
187
$
212
F-25
Table of Contents
ARCHIPELAGO
    LEARNING HOLDINGS, LLC.
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
As of December 31, 2007 and 2008 and June 30, 2009
    (unaudited), there was approximately $1,428,449, $967,206 and
    $971,147, respectively of unrecognized stock-based compensation
    expense related to non-vested Participation Shares that is
    expected to be recognized over a weighted average period of
    4.03, 3.18 and 2.95 years, respectively.
13.
EMPLOYEE
    BENEFIT PLANS
The Company provides a 401(k) defined contribution retirement
    plan for all eligible employees who meet certain eligibility
    requirements, including performing three months of service. The
    Company matches 100% up to 3% of employee contributions, plus
    50% of the amount of the participant's deferred
    compensation that exceeds 3% of the participant's
    compensation, but not in excess of 5% of the participant's
    compensation.
Participants are 100% vested in the portion of the plan
    representing employee and employer safe harbor match
    contributions. Other employer-match contributions vest over five
    years. For the years ended December 31, 2006, 2007, and
    2008, the Company made contributions of $55,932, $114,371, and
    $238,458, respectively, under this plan. For the six months
    ended June 30, 2008 and 2009 (unaudited), the Company made
    contributions of $89,633 and $194,609, respectively, under this
    plan.
14.
SEGMENT
    INFORMATION
The Company operates as one operating segment as the principal
    business activity relates to providing subscription-based online
    educational services. The chief operating decision maker, the
    Chief Executive Officer, evaluates the performance of the
    Company based upon consolidated results of operations.
15.
RELATED-PARTY
    TRANSACTIONS
The Company has made the following payments to certain related
    parties who are significant shareholders or businesses that are
    controlled by significant shareholders as follows (amounts in
    thousands):
2006
2007
2008
June 30, 2008
June 30, 2009
(Predecessor)
(Successor)
(Unaudited)
Management or advisory services
$
—
$
—
$
342
$
60
$
2
Purchases of property and equipment
—
—
344
—
178
16.
SUBSEQUENT
    EVENTS
On August 14, 2009, the Company and two related parties
    entered into a unit purchase agreement with Edline Holdings,
    Inc. ("Edline"), a company that offers web-based
    technological solutions for schools and educators. The Company
    purchased 285,601 Series A shares of Edline for
    $2.9 million, which represents 7.1% of Edline's
    outstanding Series A shares. Edline also borrowed
    $2.1 million from the Company pursuant to a five-year
    promissory note, which bears interest at 9.5% per annum and
    requires semi-annual interest-only payments. Upon completion of
    the unit purchase agreement, the Company received transaction
    fees totaling $0.2 million.
******
F-26
Table of Contents
Through and
    including          ,
    2009 (the
    25
th
day

    after the date of this prospectus), all dealers effecting
    transactions in these securities, whether or not participating
    in this offering, may be required to deliver a prospectus. This
    is in addition to the dealers' obligation to deliver a
    prospectus when acting as underwriters and with respect to their
    unsold allotments or subscriptions.
Shares
Archipelago Learning,
    Inc.
Common Stock
PROSPECTUS
BofA
    Merrill Lynch
, 2009
Table of Contents
PART II
INFORMATION
    NOT REQUIRED IN PROSPECTUS
ITEM 13.
OTHER
    EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses, other than underwriting commissions, expected to
    be incurred by Archipelago Learning, Inc. (the
    "Registrant") in connection with the issuance and
    distribution of the securities being registered under this
    Registration Statement are estimated to be as follows:
Securities and Exchange Commission Registration Fee
$
4,185
Financial Industry Regulatory Authority, Inc. Filing Fee
8,000
NYSE or Nasdaq Listing Fee
Printing and Engraving
Legal Fees and Expenses
Accounting Fees and Expenses
Blue Sky Fees and Expenses
Transfer Agent and Registrar Fees
Miscellaneous
Total
$
ITEM 14.
INDEMNIFICATION
    OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, or
    DGCL, provides that a corporation may indemnify any person who
    was or is a party or is threatened to be made a party to any
    threatened, pending or completed action, suit or proceeding
    whether civil, criminal, administrative or investigative (other
    than an action by or in the right of the corporation by reason
    of the fact that he is or was a director, officer, employee or
    agent of the corporation, or is or was serving at the request of
    the corporation as a director, officer, employee or agent of
    another corporation, partnership, joint venture, trust or other
    enterprise, against expenses (including attorneys' fees)),
    judgments, fines and amounts paid in settlement actually and
    reasonably incurred by him in connection with such action, suit
    or proceeding if he acted in good faith and in a manner he
    reasonably believed to be in or not opposed to the best
    interests of the corporation, and, with respect to any criminal
    action or proceeding, had no reasonable cause to believe his
    conduct was unlawful. Section 145 further provides that a
    corporation similarly may indemnify any such person serving in
    any such capacity who was or is a party or is threatened to be
    made a party to any threatened, pending or completed action or
    suit by or in the right of the corporation to procure a judgment
    in its favor by reason of the fact that he is or was a director,
    officer, employee or agent of the corporation or is or was
    serving at the request of the corporation as a director,
    officer, employee or agent of another corporation, partnership,
    joint venture, trust or other enterprise, against expenses
    (including attorney's fees) actually and reasonably
    incurred in connection with the defense or settlement of such
    action or suit if he acted in good faith and in a manner he
    reasonably believed to be in or not opposed to the best
    interests of the corporation and except that no indemnification
    shall be made in respect of any claim, issue or matter as to
    which such person shall have been adjudged to be liable to the
    corporation unless and only to the extent that the Delaware
    Court of Chancery or such other court in which such action or
    suit was brought shall determine upon application that, despite
    the adjudication of liability but in view of all of the
    circumstances of the case, such person is fairly and reasonably
    entitled to indemnity for such expenses which the Delaware Court
    of Chancery or such other court shall deem proper.
The Registrant's Bylaws authorize the indemnification of
    our officers and directors, consistent with Section 145 of
    the Delaware General Corporation Law, as amended. The Registrant
    intends to enter into indemnification agreements with each of
    its directors and executive officers. These agreements, among
    other things, will require the Registrant to indemnify each
    director and executive officer to the fullest extent permitted
    by Delaware law, including indemnification of expenses such as
    attorneys' fees, judgments, fines
II-1
Table of Contents
and settlement amounts incurred by the director or executive
    officer in any action or proceeding, including any action or
    proceeding by or in right of us, arising out of the
    person's services as a director or executive officer.
Reference is made to Section 102(b)(7) of the Delaware
    General Corporation Law, or DGCL, which enables a corporation in
    its original certificate of incorporation or an amendment
    thereto to eliminate or limit the personal liability of a
    director for violations of the director's fiduciary duty,
    except (i) for any breach of the director's duty of
    loyalty to the corporation or its stockholders, (ii) for
    acts or omissions not in good faith or which involve intentional
    misconduct or a knowing violation of law, (iii) pursuant to
    Section 174 of the DGCL, which provides for liability of
    directors for unlawful payments of dividends of unlawful stock
    purchase or redemptions or (iv) for any transaction from
    which a director derived an improper personal benefit.
Reference is also made to Section 145 of the DGCL, which
    provides that a corporation may indemnify any person, including
    an officer or director, who is, or is threatened to be made,
    party to any threatened, pending or completed legal action, suit
    or proceeding, whether civil, criminal, administrative or
    investigative, other than an action by or in the right of such
    corporation, by reason of the fact that such person was an
    officer, director, employee or agent of such corporation or is
    or was serving at the request of such corporation as a director,
    officer, employee or agent of another corporation or enterprise.
    The indemnity may include expenses (including attorneys'
    fees), judgments, fines and amounts paid in settlement actually
    and reasonably incurred by such person in connection with such
    action, suit or proceeding, provided such officer, director,
    employee or agent acted in good faith and in a manner he
    reasonably believed to be in, or not opposed to, the
    corporation's best interest and, for criminal proceedings,
    had no reasonable cause to believe that his conduct was
    unlawful. A Delaware corporation may indemnify any officer or
    director in an action by or in the right of the corporation
    under the same conditions, except that no indemnification is
    permitted without judicial approval if the officer or director
    is adjudged to be liable to the corporation. Where an officer or
    director is successful on the merits or otherwise in the defense
    of any action referred to above, the corporation must indemnify
    him against the expenses that such officer or director actually
    and reasonably incurred.
The Registrant expects to maintain standard policies of
    insurance that provide coverage (i) to its directors and
    officers against loss rising from claims made by reason of
    breach of duty or other wrongful act and (ii) to the
    Registrant with respect to indemnification payments that it may
    make to such directors and officers.
The proposed form of Underwriting Agreement to be filed as
    Exhibit 1.1 to this Registration Statement provides for
    indemnification to the Registrant's directors and officers
    by the underwriters against certain liabilities.
ITEM 15.
RECENT
    SALES OF UNREGISTERED SECURITIES.
On August 4, 2009, Archipelago Learning, Inc., a Delaware
    corporation was formed. Archipelago Learning Holdings, LLC
    purchased 100 shares of common stock of Archipelago
    Learning, Inc. for $1,000 in a transaction exempt from
    registration pursuant to Section 4(2) of the Securities Act
    of 1933, as it was a transaction by an issuer that did not
    involve a public offering of securities.
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Table of Contents
ITEM 16.
EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES.
(a)
Exhibits
Exhibit
Number
Description of Exhibits
1
.1*
Form of Underwriting Agreement.
3
.1*
Form of Certificate of Incorporation of Archipelago Learning,
    Inc.
3
.2*
Form of Bylaws of Archipelago Learning, Inc.
3
.3
Second Amended and Restated Limited Liability Company Agreement
    of Study Island Holdings, LLC.
4
.1*
Form of Common Stock Certificate.
4
.2*
Form of Shareholders Agreement.
4
.3*
Form of Registration Rights Agreement.
5
.1*
Opinion of Weil, Gotshal & Manges LLP.
10
.1
2007 Equity Compensation Plan.
10
.2
Form of Participation Share Agreement.
10
.3*
Form of Indemnification Agreement between Archipelago Holdings,
    Inc. and each of its directors and executive officers.
10
.4*
Form of Archipelago Learning, Inc. 2009 Omnibus Incentive Plan.
10
.5
Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and Cameron Chalmers.
10
.6
First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and Cameron Chalmers.
10
.7
Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Cameron Chalmers.
10
.8
Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and David Muzzo.
10
.9
First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and David Muzzo.
10
.10
Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and David Muzzo.
10
.11
Employment Agreement, dated as of January 28, 2007, between
    Study Island, LLC and Timothy McEwen.
10
.12
First Amendment to Employment Agreement, dated as of March 16,
    2007, between Study Island, LLC and Timothy McEwen.
10
.13
Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Timothy McEwen.
10
.14
Employment Agreement, dated as of August 31, 2009, between
    Archipelago Learning Holdings, LLC and Timothy McEwen.
10
.15
Employment Agreement, dated as of May 22, 2007, between Study
    Island, LLC and James Walburg.
10
.16
First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and James Walburg.
10
.17
Employment Agreement, dated as of August 31, 2009, between
    Archipelago Learning Holdings, LLC and James Walburg.
10
.18
Employment Agreement, dated as of August 28, 2009, between
    Archipelago Learning, Inc. and Julie Huston.
10
.19
Employment Agreement, dated as of September 15, 2008, between
    Study Island, LLC and Ray Lowrey.
10
.20
First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Ray Lowrey.
II-3
Table of Contents
Exhibit
Number
Description of Exhibits
10
.21
Credit Agreement, dated as of November 16, 2007, by and among
    Study Island, LLC, the other persons designated as credit
    parties from time to time, General Electric Capital Corporation,
    as a lender and as agent for all lenders, NewStar Financial,
    Inc., as syndication agent, the other parties thereto as lenders
    and GE Capital Markets, Inc. and NewStar Financial, Inc., as
    joint lead arrangers and joint bookrunners.
10
.22
Amendment No. 1 to Credit Agreement, dated as of May 21, 2008.
10
.23
Amendment No. 2 to Credit Agreement, dated as of February 18,
    2009.
10
.24
Amendment No. 3 to Credit Agreement, dated as of April 30, 2009.
10
.25
Amendment No. 4 to Credit Agreement, dated as of May 15, 2009.
10
.26
Amendment No. 5 to Credit Agreement, dated as of
    September 2, 2009.
10
.27
Guaranty and Security Agreement, dated as of November 16, 2007,
    by and among Study Island, LLC, General Electric Capital
    Corporation and the other grantors party thereto.
21
.1
List of Subsidiaries of Archipelago Learning, Inc.
23
.1
Consent of Deloitte & Touche LLP, Independent Registered
    Public Accounting Firm relating to Archipelago Learning, Inc.
23
.2
Consent of Deloitte & Touche LLP, Independent Registered
    Public Accounting Firm, relating to Archipelago Learning
    Holdings, LLC.
23
.3*
Consent of Weil, Gotshal & Manges LLP (included in the
    opinion filed as Exhibit 5.1 hereto).
24
.1
Power of Attorney (included on signature page).
*
To be filed by amendment.
(b)
Financial Statement Schedules
ITEM 17.
UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
    underwriters at the closing specified in the underwriting
    agreements, certificates in such denominations and registered in
    such names as required by the underwriters to permit prompt
    delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
    Securities Act of 1933 may be permitted to directors,
    officers and controlling persons of the registrant pursuant to
    the provisions referenced in Item 14 of this registration
    statement, or otherwise, the registrant has been advised that in
    the opinion of the Securities and Exchange Commission such
    indemnification is against public policy as expressed in the
    Securities Act and is, therefore, unenforceable. In the event
    that a claim for indemnification against such liabilities (other
    than the payment by the registrant of expenses incurred or paid
    by a director, officer, or controlling person of the registrant
    in the successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered hereunder, the
    registrant will, unless in the opinion of its counsel the matter
    has been settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question of whether such
    indemnification by it is against public policy as expressed in
    the Securities Act and will be governed by the final
    adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
(2) For the purpose of determining any liability under the
    Securities Act of 1933, each post-effective amendment that
    contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
II-4
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
    registrant has duly caused this registration statement to be
    signed on its behalf by the undersigned, thereunto duly
    authorized, in the City of Dallas, State of Texas, on the 3rd
    day of September, 2009.
ARCHIPELAGO LEARNING, INC.
By:
/s/  Tim
    McEwen
Name:     Tim McEwen
Title:
President and Chief Executive Officer
POWER OF
    ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
    constitutes and appoints each of Tim McEwen and James Walburg,
    or either of them, each acting alone, his true and lawful
    attorney-in-fact and agent, with full power of substitution and
    resubstitution, for such person and in his name, place and
    stead, in any and all capacities, to sign this Registration
    Statement on
Form S-1
(including all pre-effective and post-effective amendments and
    registration statements filed pursuant to Rule 462 under
    the Securities Act of 1933), and to file the same, with all
    exhibits thereto, and other documents in connection therewith,
    with the Securities and Exchange Commission, granting unto said
    attorneys-in-fact and agents, each acting alone, full power and
    authority to do and perform each and every act and thing
    requisite and necessary to be done in and about the premises, as
    fully to all intents and purposes as he might or could do in
    person, hereby ratifying and confirming that any such
    attorney-in-fact and agent, or his substitute or substitutes,
    may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
    registration statement has been signed by the following persons
    in the capacities on the 3rd day of September, 2009.
Signature
Title
/s/  Tim
    McEwen
Tim
    McEwen
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/  James
    Walburg
James
    Walburg
Executive Vice President, Chief Financial
Officer and Secretary
(Principal Financial and Accounting Officer)
/s/  Cameron
    Chalmers
Cameron
    Chalmers
Vice President and Director
/s/  David
    Muzzo
David
    Muzzo
Vice President and Director
/s/  David
    Phillips
David
    Phillips
Director
/s/  Michael
    Powell
Michael
    Powell
Director
/s/  Peter
    Wilde
Peter
    Wilde
Chairman
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description of Exhibits
1
.1*
Form of Underwriting Agreement.
3
.1*
Form of Certificate of Incorporation of Archipelago Learning,
    Inc.
3
.2*
Form of Bylaws of Archipelago Learning, Inc.
3
.3
Second Amended and Restated Limited Liability Company Agreement
    of Study Island Holdings, LLC.
4
.1*
Form of Common Stock Certificate.
4
.2*
Form of Shareholders Agreement.
4
.3*
Form of Registration Rights Agreement.
5
.1*
Opinion of Weil, Gotshal & Manges LLP.
10
.1
2007 Equity Compensation Plan.
10
.2
Form of Participation Share Agreement.
10
.3*
Form of Indemnification Agreement between Archipelago Holdings,
    Inc. and each of its directors and executive officers.
10
.4*
Form of Archipelago Learning, Inc. 2009 Omnibus Incentive Plan.
10
.5
Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and Cameron Chalmers.
10
.6
First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and Cameron Chalmers.
10
.7
Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Cameron Chalmers.
10
.8
Employment Agreement, dated as of January 10, 2007, between
    Study Island, LLC and David Muzzo.
10
.9
First Amendment to Employment Agreement, dated as of November
    21, 2008, between Study Island, LLC and David Muzzo.
10
.10
Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and David Muzzo.
10
.11
Employment Agreement, dated as of January 28, 2007, between
    Study Island, LLC and Timothy McEwen.
10
.12
First Amendment to Employment Agreement, dated as of March 16,
    2007, between Study Island, LLC and Timothy McEwen.
10
.13
Second Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Timothy McEwen.
10
.14
Employment Agreement, dated as of August 31, 2009, between
    Archipelago Learning Holdings, LLC and Timothy McEwen.
10
.15
Employment Agreement, dated as of May 22, 2007, between Study
    Island, LLC and James Walburg.
10
.16
First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and James Walburg.
10
.17
Employment Agreement, dated as of August 31, 2009, between
    Archipelago Learning Holdings, LLC and James Walburg.
10
.18
Employment Agreement, dated as of August 28, 2009, between
    Archipelago Learning, Inc. and Julie Huston.
10
.19
Employment Agreement, dated as of September 15, 2008, between
    Study Island, LLC and Ray Lowrey.
10
.20
First Amendment to Employment Agreement, dated as of December
    31, 2008, between Study Island, LLC and Ray Lowrey.
Table of Contents
Exhibit
Number
Description of Exhibits
10
.21
Credit Agreement, dated as of November 16, 2007, by and among
    Study Island, LLC, the other persons designated as credit
    parties from time to time, General Electric Capital Corporation,
    as a lender and as agent for all lenders, NewStar Financial,
    Inc., as syndication agent, the other parties thereto as lenders
    and GE Capital Markets, Inc. and NewStar Financial, Inc., as
    joint lead arrangers and joint bookrunners.
10
.22
Amendment No. 1 to Credit Agreement, dated as of May 21, 2008.
10
.23
Amendment No. 2 to Credit Agreement, dated as of February 18,
    2009.
10
.24
Amendment No. 3 to Credit Agreement, dated as of April 30, 2009.
10
.25
Amendment No. 4 to Credit Agreement, dated as of May 15, 2009.
10
.26
Amendment No. 5 to Credit Agreement, dated as of
    September 2, 2009.
10
.27
Guaranty and Security Agreement, dated as of November 16, 2007,
    by and among Study Island, LLC, General Electric Capital
    Corporation and the other grantors party thereto.
21
.1
List of Subsidiaries of Archipelago Learning, Inc.
23
.1
Consent of Deloitte & Touche LLP, Independent Registered
    Public Accounting Firm, relating to Archipelago Learning, Inc.
23
.2
Consent of Deloitte & Touche LLP, Independent Registered
    Public Accounting Firm, relating to Archipelago Learning
    Holdings, LLC.
23
.3*
Consent of Weil, Gotshal & Manges LLP (included in the
    opinion filed as Exhibit 5.1 hereto).
24
.1
Power of Attorney (included on signature page).
*
To be filed by amendment.