persons other than the Principals and their Affiliates, if 
specified by the Profits Participation Limited Partner, but not 
with respect to more than 2/11ths of the Profits Participation 
Units) to the extent of an 8% preferred return; 
Third, to the Profits Participation Limited Partner in the 
additional amount the Profits Participation Limited Partner 
would have received pursuant to the prior paragraph if it had 
fully participated in the distribution of the 8% preferred return 
with respect to all outstanding Profits Participation Units; and 
Fourth, to the Common Limited Partners, the Profits 
Participation Limited Partner, and the General Partner in 
proportion to the number of Units held by each such Partner. 
Distributions may be made in cash or in kind. Allocations of 
income, gains, profits and losses are described in "The 
Structure of KUE and the General Partner" in this Private 
Placement Memorandum. 
The Limited Partnership Agreement gives the General 
Partner the authority to override the distribution provisions of 
the Limited Partnership Agreement described above in order 
to achieve the desired economic arrangement of KUE, which 
is: (i) first, to return the Partners' Capital Contributions to 
them; (ii) second, for the Common Limited Partners and the 
General Partner to receive their Preferred Return while the 
30 
Profits Participation Limited Partner concurrently receives an 
amount equal to a fraction of the amount the Common 
Limited Partners and the General Partner received pursuant 
to their Preferred Return (such fraction to be equal to the 
portion of the Units held by the Profits Participation Limited 
Partner attributable to members of the Profits Participation 
Limited Partner other than the Principals), multiplied by the 
number of Units held by the Profits Participation Limited 
Partner divided by the number of outstanding Units other 
than those Units held by the Profits Participation Limited 
Partner; (iii) third, for the Profits Participation Limited Partner 
to receive an amount equal to a fraction of the amount the 
Common Limited Partners and the General Partner received 
pursuant to their Preferred Return (such fraction to be equal 
to the portion of the Units held by the Profits Participation 
Limited Partner attributable to members of the Profits 
Participation Limited Partner who are Principals or their 
affiliates), multiplied by the number of Units held by the 
Profits Participation Limited Partner divided by the number of 
outstanding Units other than those Units held by the Profits 
Participation Limited Partner; and (iv) finally, for all Partners 
(including the Profits Participation Limited Partner) to share 
in the profits of the Partnership in proportion to the number 
of Units held by them. 
Notwithstanding any contrary provisions below addressing 
equal merger consideration, in connection with any 
distribution of securities of a subsidiary entity which has high 
vote and low vote (or non-voting) securities with substantially 
equivalent economic rights, the Principals can receive the 
high-vote securities in such a distribution while the other 
holders of Common LP Units receive the low vote (or non-
voting) securities, as long as the securities otherwise have 
substantially equivalent economic rights and the high-vote 
securities have mandatory conversion features equivalent to 
the mandatory conversion provision of the Class B Shares. 
Equal Merger Consideration Provision: The Principals (through KUE LLC) and the Investors will 
receive the same consideration per Common LP Unit and/or 
Class A/Class B Shares in connection with a sale, merger, 
recapitalization, share repurchase, dividend, or any other 
transaction where all holders of Common LP Units or shares 
in the General Partner receive consideration with respect to 
their Common LP Units or shares, other than with respect to 
corporate restructuring transactions, such as a holding 
company merger, conversion of KUE from an exempted 
limited partnership to a corporation or other entity, change of 
domicile, or any other transaction that the Independent 
Committee determines is a "corporate restructuring." In any 
such corporate restructuring transaction, the Principals 
(through KUE LLC) may receive securities with high-voting 
rights and the Investors may receive securities with limited or 
no voting rights so long as the consideration received by the 
Principals (through KUE LLC) and the other Partners per 
31 
Common LP Unit have substantially equivalent economic 
provisions. 
Fixed Overhead Payment: 
KUE and/or one or more of its subsidiaries will pay $20 
million annually to KULG in quarterly installments beginning 
July 1, 2006 pursuant to the Fixed Overhead Payment 
Agreement as an agreed upon payment to provide for the 
reimbursement of expenses and other costs incurred by 
KULG on behalf of KUE and its subsidiaries (including, but 
not limited to, salaries and bonuses of KULG employees 
providing services to KUE and its subsidiaries, fees and 
expenses relating to financing transactions and acquisitions, 
professional fees and other administrative expenses). To 
the extent that the U.S. $2,500,000 fee payable pursuant to 
an existing management services agreement with 
Knowledge Learning Corporation is paid to any person or 
entity other than a subsidiary of KUE, the amount payable to 
KULG by KUE will be reduced by the amount of such 
payment to such other person or entity. The $20 million 
annual fee will terminate upon the Initial Listing (as defined 
below) or the sale of KUE to a person or entity that is not a 
KUE LLC Entity. 
Voting Rights: The General Partner will manage and operate KUE. 
The Investors will have no voting rights on matters affecting 
Company business with respect to their Common LP Units in 
KUE because the Investors will be limited partners of KUE. 
Notwithstanding the foregoing, subject to certain exceptions, 
KUE must obtain the consent of (a) the holders of a majority 
of the Common LP Units unaffiliated with the Principals to 
amend the Limited Partnership Agreement in a manner that 
is adverse to the Common LP holders and (b) the holders of 
at least 90% of the Common LP Units unaffiliated with the 
Principals to amend the "Equal Merger Consideration 
Provision" described above. In addition, the General Partner 
may not take any action to (a) alter or add to its Articles or 
(b) alter or add to its Memorandum with respect to any 
objects, powers or other matters specified therein that would 
adversely affect the rights of holders of Class A Shares 
without the affirmative vote of the holders of a majority of the 
Class A Shares. 
Holders of the Class A Shares of the General Partner will 
have one vote per share. The holders of Class B Shares, 
will have in the aggregate one more vote than the requisite 
legal vote required to approve particular matters. In addition, 
the Investors will have the right to elect directors to the 
Board of Directors of the General Partner as set forth in 
"Board of Directors" below. 
The Class B Shares will automatically convert to Class A 
Shares if the Principals' aggregate direct and indirect 
economic interest in KUE is less than 15% of the 
32 
outstanding Partnership Units of KUE. 
Board of Directors: 
Initial Listing Process: 
The General Partner will have a Board of Directors initially 
consisting of up to 13 persons. 
Following the first closing of the offering and prior to the 
"Initial Listing" (as defined below), the outside Investor 
(including its affiliates) holding the greatest number of shares 
in the General Partner at the first closing of the offering will 
appoint two directors of the General Partner and the holders 
of the Class B Shares will appoint the remaining directors. 
Following the initial appointment of the Board, the Board 
may, in its sole discretion, increase the number of directors, 
including to accommodate investors that invest subsequent 
to the initial closing of the offering of the Units, provided that 
the outside Investor appointing two directors pursuant to the 
paragraph above shall have the right to appoint additional 
directors as required to maintain a ratio of such Investor's 
designees to total Board members of not less than 2/15ths. 
"Independent Directors" of the Board of Directors of the 
General Partner shall be individuals who (a) are not (i) a 
Principal, (ii) a family member of a Principal, (iii) an 
employee of a Principal or any entity controlled by one or 
more of the Principals, and (b) meet the definition of 
"independent director" set forth in Rule 303A.02 of the New 
York Stock Exchange Listed Company Manual (as if the 
General Partner, the Partnership and each of its Subsidiaries 
were the "listed company") , including any such individuals 
appointed by the Investors who otherwise satisfy the 
requirements of this definition. 
At the time of the final closing of this offering, the General 
Partner will have at least two Independent Directors. After 
the Initial Listing and so long as consistent with contractual, 
listing and licensing obligations, a majority of the board of 
directors of the listed company will be Independent 
Directors. 
"Initial Listing" means a listing on a recognized international 
securities exchange with a substantially concurrent 
underwritten offering generating gross proceeds of U.S. 
$200 million or more. "Initial Listing" refers to the Initial 
Listing of KUE or any successor or any subsidiary of KUE to 
which substantially all of KUE's assets and liabilities have 
been transferred or are held. 
The General Partner may take and cause KUE to take such 
actions as the General Partner reasonably deems necessary 
to complete the Initial Listing on the recognized international 
securities exchange or exchanges selected by the General 
Partner, including without limitation a restructuring or 
reorganization or other transaction or asset transfer between 
or among KUE and any of its subsidiaries, and may require 
33 
Partners to exchange their interests in KUE and the General 
Partner for interests in a subsidiary of KUE. 
Related Party Transactions: 
Related party transactions include transactions between (1) 
any of the Principals or any of their affiliates or any entity 
controlled by any of the Principals, and (2) KUE or any direct 
or indirect subsidiary or joint venture of KUE involving more 
than $1 million (including, for the avoidance of doubt, any 
merger, acquisition, asset purchase or similar transaction 
between KUE, its subsidiaries or joint ventures, on the one 
hand, and any person of which fifteen percent (15%) or more 
of the voting stock (or similar voting interests) is owned by 
KUE LLC or its affiliates, on the other hand). Related party 
transactions do not include (a) any transaction solely 
between or among KUE and any of its direct or indirect 
subsidiaries or joint ventures in which the Principals do not 
have any direct or indirect ownership interest (other than as 
a result of their ownership in the General Partner and KUE), 
(b) reasonable and customary director, advisory board 
member, or consultant compensation and benefits 
(including, without limitation, retirement, health, stock option 
and other benefit plans) as approved by the Independent 
Committee, provided that any such compensation, benefits 
and arrangements to the Principals that do not exceed $1 
million in the aggregate annually shall not be subject to such 
approval, and customary indemnification arrangements, (c) 
transactions and arrangements pursuant to or contemplated 
by express terms of the Limited Partnership Agreement of 
KUE, including the "Investment in Subsidiaries" and "Co-
Invest Right" described below, and any payments pursuant 
thereto, and the Fixed Overhead Payment described above, 
(d) agreements, transactions and arrangements described in 
"Related Party Transactions" in this Private Placement 
Memorandum and any amendment thereto (so long as such 
amendment is not disadvantageous to the Investors as a 
whole in any material respect) or any transaction 
contemplated thereby and any payments pursuant thereto, 
and (e) admissions of any affiliate of the Principals to KUE 
as a Limited Partner on terms substantially equivalent to 
concurrent admissions of persons that are not affiliates of 
the Principals. 
If the size of the related party transaction is greater than $1 
million and equal to or less than $50 million, then either (a) 
the Independent Committee must approve the transaction or 
(b) the transaction must be approved by the holders of a 
majority of the Common LP Units unaffiliated with the 
Principals. 
If the size of the related party transaction is greater than $50 
million, then the transaction must be approved by both (a) 
the Independent Committee and (b) the holders of a majority 
of the Common LP Units unaffiliated with the Principals. 
34 
Investment in Subsidiaries: 
Transferability of Units: 
Tag-Along Right: 
Not in limitation of any commitments or restrictions the 
Principals may have entered into, prior to an Initial Listing, 
KUE may not permit any of its subsidiaries or controlled joint 
ventures (which shall not include, for the avoidance of doubt, 
certain exempt companies contemplated by the following 
paragraph) to issue or grant any equity interests in such 
subsidiaries or controlled joint ventures to any of the 
Principals or any of their affiliates (other than KUE, its 
subsidiaries and controlled joint ventures) unless (i) the 
Independent Committee approves and the Investors who are 
accredited investors (as such term is defined in Regulation 
D) or otherwise legally eligible to participate are offered the 
opportunity to participate on the same terms as the 
Principals and their affiliates and in proportion to their 
economic ownership of KUE or (ii) such subsidiary or joint 
venture of KUE has completed an initial listing on a 
recognized international securities exchange, subject to 
certain limited exceptions. 
The Principals intend that KUE will be their exclusive vehicle 
for equity investment opportunities in and acquisitions of for-
profit companies engaged primarily in the business of pre-K 
through 12th grade education of children, subject to limited 
exceptions as set forth in "The Structure of KUE and the 
General Partner" in this Private Placement Memorandum. 
The Common LP Units and the Class A Shares comprising 
the Units owned by the Investors will not be separately 
transferable, and the Units are to be transferred as a whole 
unless otherwise approved by the Board of Directors of the 
General Partner and the Independent Committee (defined 
below). 
Units held by an Investor may not be sold, transferred or 
assigned without the prior written consent of the General 
Partner, not to be unreasonably withheld. The General 
Partner intends, during the first two years after the applicable 
closing of the offering, to approve transfers of the Units to an 
affiliate of the Investor, in compliance with applicable law. 
After such time, the General Partner intends to approve 
transfers of Units to an affiliate of the Investor or to another 
Investor (and affiliates thereof), in each case in compliance 
with applicable law. The General Partner also intends to 
approve transfers pursuant to the Tag-Along Right and Drag-
Along Right provisions described below. 
Unless the Investors' Units (or securities received in 
exchange for Units if the Initial Listing is of a Subsidiary of 
KUE) are freely tradable without volume restrictions on the 
exchange on which the Initial Listing occurred, with respect 
to any proposed transfer of the Common LP Units held by 
KUE LLC and its affiliates to a non-affiliate purchaser (and, 
unless otherwise approved by the Board of Directors and the 
Independent Committee of the General Partner, a 
35 
corresponding percentage of Class A Shares held by KUE 
LLC), the Investors may sell a pro rata portion of their 
Common LP Units and corresponding Class A Shares in the 
proposed transfer on the same terms and in exchange for 
the same consideration per Unit (and Class A Share) 
received by KUE LLC and its affiliates. 
Following the Initial Listing, the tag-along right will continue 
for certain Investors with respect to transfers for value of the 
Units (or units of the listed entity as the case may be) by the 
Principals or their affiliates to non-affiliates (excluding 
transfers on a recognized international securities exchange) 
above the following thresholds in one or more transactions: 
(i) 15% of the Principals' original KUE holdings to any single 
buyer (or affiliates of that buyer) or (i) 33% of the Principals' 
original KUE holdings in the aggregate. 
Drag-Along Right: 
Co-Invest Right: 
Additional Listing of Investors' Units: 
Prior to the Initial Listing, with respect to any proposed 
transfer of a majority of the Units held by KUE LLC to a 
proposed non-affiliate purchaser (and, unless otherwise 
approved by the Board of Directors and the Independent 
Committee of the General Partner, a corresponding 
percentage of Class A Shares held by KUE LLC), the 
Investors may be required to sell a pro rata portion of their 
Units and corresponding Class A Shares in the proposed 
transfer on the same terms and in exchange for the same 
consideration received by KUE LLC. 
Prior to the Initial Listing, if KUE proposes to issue for cash 
any Units or securities convertible into Units after the 
Offering Period (subject to certain exceptions), then KUE is 
required to offer to each Investor that is an accredited 
investor (as such term is defined in Regulation D) or 
otherwise legally eligible to participate in the offering, the 
right to purchase a pro rata portion of such securities. 
Prior to the Initial Listing, the Investors have substantially 
equivalent rights with respect to issuances of securities by 
the General Partner. 
Beginning any time after six months after the Initial Listing, 
one or more holders holding an aggregate of $100 million of 
more of the Units may request KUE and the General Partner 
to take such action as may be necessary for their Units to be 
freely tradable and not subject to volume restrictions on the 
international securities exchange on which the Initial Listing 
occurred; provided that no more than one such action may 
be required in any 12 month period and customary cut-back 
and other provisions will apply in any such listing or 
underwritten transaction, as the case may be. KUE will use 
its commercially reasonable efforts to cause such action to 
cover such holders and the securities of any other holders 
legally eligible to participate in such action. 
36 
Term: The term of KUE will be indefinite, unless terminated earlier 
in accordance with the Limited Partnership Agreement. 
Illiquidity Period: 
KUE will operate for a period of seven years from the date of 
the first closing of this offering. If there has not been an 
Initial Listing by the end of seven years from the date of the 
first closing of this offering, the Board of Directors of the 
General Partner will determine whether to pursue a sale of 
KUE or an Initial Listing (or a dual track process); provided, 
however, in the event that not less than 75% of the value of 
KUE at that time is represented by shares of securities listed 
on one or more recognized international securities 
exchanges and such shares have been or will be distributed 
as soon as reasonably practicable thereafter to the Investors 
and the Investors have received distributions of cash and/or 
such securities valued at amounts equal to or in excess of 
their original capital contributions, then there shall be two 
extensions of one year's duration each in order for KUE to 
complete either an Initial Listing or to have the remaining 
value of KUE represented by shares of securities listed on a 
recognized international securities exchange and to 
distribute such shares to the Investors. The Board of 
Directors shall approve the desired course of action. 
If the Board determines to pursue a sale of KUE (or an Initial 
Listing or a dual track process), then the Principals must 
determine at such time whether they intend to participate as 
a potential bidder in the sale process. 
If the Principals elect not to participate as a potential bidder 
in a sale process, then they will not be allowed to 
subsequently elect to participate as a potential bidder unless 
the sale process does not result in a buyer at a price the 
Independent Committee deems to be "fair." If the sale 
process results in a transaction that the Independent 
Committee deems to be "fair", the Principals will be required 
to sell their entire stake in KUE (Common LP Units and 
Profits Participation LP Units on an "as converted" basis) on 
the same terms as the Investors. 
If the Principals elect to participate as a potential bidder in a 
sale process, then the sale process will be managed by the 
Independent Committee and the Principals will be precluded 
from participating in Board deliberations regarding the sale 
process. In addition, the Principals will be required to sell 
their entire stake in KUE on the same terms as the Investors 
to the winning bidder in the event the Principals do not 
submit the most attractive bid. 
In the event that a sale of KUE or an Initial Listing has not 
occurred within nine years from the date the first Investors 
are admitted to KUE, the Independent Committee shall 
determine whether to pursue a sale of KUE (or an Initial 
Listing or a dual track process). A majority vote of the 
37 
Independent Committee on this issue shall be binding on the 
Board of Directors of the General Partner and will require the 
Board of Directors of the General Partner to pursue such 
action within ninety (90) days. 
Indemnification: KUE will indemnify the General Partner and its members, 
officers, directors, and employees, and at the General 
Partner's discretion, any other person providing services to 
KUE, its subsidiaries or joint ventures. KUE has provided a 
customary indemnity to the Agents in connection with their 
services. 
Periodic Reporting: KUE will provide annual audited financial statements and 
semi-annual reports. The General Partner will provide such 
periodic reports if engaged in any business other than acting 
as general partner of KUE or if it owns any material assets 
other than an interest in KUE. 
Certain U.S. Federal Income Tax For a discussion of certain U.S. federal income tax 
Consequences: consequences that may be relevant to prospective investors, 
please read "Certain Income Tax Consequences" in this 
Private Placement Memorandum. 
38 
3. USE OF PROCEEDS 
The proceeds of this offering will be used: (i) to expand operations, including through strategic 
acquisitions in the U.S. and internationally, (H) to develop new products and services, (Hi) to repay, in 
whole or in part, $150 million of existing debt plus accrued interest (including through application of a 
portion of the proceeds of the initial closing of the offering after payment of expenses and preferred 
returns), which currently bears interest at either the reserve adjusted LIBOR rate plus 0.125% or the base 
rate (generally the applicable prime lending rate, as announced from time to time), (iv) to pay an 
estimated $50 million in fees and expenses (including amounts payable to the Agents and including 
amounts payable from July 1, 2006 under the Fixed Overhead Payment Agreement), (v) in the discretion 
of KUE LLC, payment at the initial closing of the offering of approximately $7.0 million of accrued return 
on the preferred limited partner units of KUE being converted to Common LP Units if such accrued return 
is not converted to Common LP Units and (vi) for other corporate purposes. Until the proceeds are used, 
KUE currently intends to invest the unapplied proceeds in cash-equivalents and short-term marketable 
securities. 
39 
4. CAPITALIZATION 
The following table sets forth KUE's cash, cash equivalents and senior capitalization as of December 31, 
2005: 
• on an actual basis; and 
• on a pro forma basis to give effect to the sale of $1 billion in Units in this offering by KUE after 
deducting estimated offering fees and estimated offering expenses payable by KUE. 
You should read this table together with "Management's Discussion and Analysis of KLC's Pro Forma 
Results of Operations" and the audited and unaudited consolidated financial statements and the related 
notes appearing elsewhere in this Memorandum. See "Related Party Transactions" for more information 
on related party interests. 
KUE Senior Capitalization 
As of April 1,2006 
Actual 	Adjustmentsl 	Pro Forma 
Cash 
KUE 	$9.4 	$800.0 	$809.4 
KUE Inc. 	5.4 	5.4 
KSI 	3.0 	3.0 
KLC OpCo 	115.4 	115.4 
KLC PropCo 	31.8 	31.8 
Total Cash 	$164.9 	$800.0 	$964.9 
Debt 
KUE2 	$150.0 	($150.0) 	$0.0 
KUE Inc.3 	183.9 	183.9 
KLC OpCo - Sr. Sub. Notes 	260.0 	260.0 
KLC OpCo - Capital Leases 	16.2 	16.2 
KLC PropCo - CMBS 	697.7 	697.7 
KLC PropCo - Junior Mezzanine4 	147.9 	147.9 
Total Debt 	$1,455.7 	$1,305.7 
Preferred Equity 
KUE5 	180.0 	(180.0) 	0.0 
Total Debt and Preferred Equity 	$1,635.7 	$1,305.7 
Assumes $50 million of fees and expenses. 
2 Upon closing, KUE LLC will contribute all of its assets to KUE. In addition, upon contribution of assets to KUE by KUE LLC, KUE will 
become a co-borrower to the KUE LLC term loan which will be repaid with the proceeds of the offering. 
3 Includes capitalized interest of $10.7 million. 
4 Represents book value net of original issue discount plus capitalized interest. Original principal amount is $150 million. 
5 Reflects the conversion of existing preferred limited partner units of KUE LLC into common limited partner units of KUE at the offering 
price. 
40 
Organizational Structure - Pro Forma for Funding of $1 Billion. Al! figures are rounded. 
Principals 
100% 
Investors 
1,000,000 
Class A 
Shares 
1,000,000 -----
Common 
LP Units 
900 
Class B 
Shares 
KUE Management Inc., a 
Cayman Islands 
exempted company 
"General Partner" 
Approx. 
1,000 
General 
Partner Units 
Knowledge Universe Holdings LLC, 
a Delaware limited liability company 
"KUH" 
Knowledge Universe Learning Group LLC, 
a Delaware limited liability company 
"KULG" 
100% 
Knowledge Universe Education LLC, 
a Delaware limited liability company 
"KUE LLC" 
1,530,000 
Class A 
Shares 
1,530,000 
Common LP 
Units 
Knowledge Universe Education L.P., a 
Cayman Islands Exempted Limited Partnership 
"KUE" 
100% 
KU Education Inc. 
"KUE Inc." 
87.6% 
Knowledge Schools, Inc. 
"KSI" 
1100% 
Knowledge Learning 
Corporation 
"KLC" 
17.9% to 40.0%' 
k12 Inc. 
"k12" 
11% Profits 
Participation 
Interest 
Limited 
Partner' 
KUE owns preferred stock that is convertible into 17.9% of k12's Common Stock. KUE's ownership varies depending on the liquidation value or 
sale value of k12 and according to the preference of the various securities KUE owns. At higher valuations, KUE's percentage ownership is lower. 
See "k12 Inc. (k12) — k12 Equity." 
2 Of those Profits Participation LP Units outstanding immediately after the offering, 2/11ths will be allocated or held for the benefit of persons other 
than the Principals or their affiliates. 
41 
5. SUMMARY FINANCIAL DATA 
The following summary historical pro forma and projected financial data should be read in conjunction 
with the financial statements and "Management's Discussion and Analysis of KLC's Pro Forma Results of 
Operations" presented elsewhere in this Memorandum. See also "Non-GAAP Financial Measures" 
elsewhere in this Memorandum for a discussion of the derivation and limitations of EBITDA, Adjusted 
EBITDA and Adjusted EBITDAR. The historical information is pro forma for the effects of our acquisition 
of KinderCare in January 2005 and for the separation of our business into operating (KLC OpCo) and 
property (KLC PropCo) in November 2005, as if those transactions and related financing had occurred on 
January 1, 2004. The rental income received by KLC PropCo in all periods presented is primarily 
comprised of lease payments from KLC OpCo. 
Our pro forma results for KLC were not prepared in conformity with Article 11 of Regulation S-X of the 
SEC (which would not, among other limitations, permit a 2004 pro forma presentation after completion of 
our 2005 financial statements). In addition, by presenting a pro forma comparison, this section does not 
include a comparison of KLC's historical GAAP consolidated operating results or segment information that 
would be required by Item 3-03 of Regulation S-X of the SEC. In addition, the non-GAAP financial 
information presented below does not comply with Item 10(e) of Regulation S-K or Regulation G of the 
SEC. For further information, please see KLC's GAAP financial statements and those of KinderCare 
included in this Memorandum. 
The pro forma presentation below is not shown with adjustments to historical financial statements. 
Instead, it is based on a "ground up" combination of corporate level expenditures (overhead and capital 
expenditures) and internal financial statements derived from a center-by-center build up of KLC's results. 
The primary reasons for the presentation based on internal reports are different fiscal year ends and 
expense classification between KLC and KinderCare. 
Projected results presented below are based on assumptions management believes to be reasonable, but 
which are inherently uncertain and may not be realized. For a discussion of the assumptions, see "The 
Operating Company (KLC OpCo) - Summary Financial Information and Projections Discussion" and "The 
Real Estate Company (KLC PropCo) - Summary Financial Information and Projections Discussion." Our 
ability to perform as projected depends on a number of variables that cannot be predicted with certainty 
and our performance could be adversely affected by a number of factors, including those described in 
"Risk Factors" elsewhere in this Memorandum. See also "Forward-Looking Statements." 
KLC Consolidated Historical Pro Forma and Projected Financial Summary 
($ in millions) 	Fiscal Year Ended December 31, 
2004Pr 	2005Pr 	2006P 	2007P 
OPERATIONAL DATA: Revenue Revenue Growth 	$1,442.2 	$1,477.7 2.5% 	$1,557.8 5.4% 	$1,661.0 6.6% 
Gross Profit 	$329.6 	$340.7 	$387.0 	$421.4 
Adjusted EBITDA2 	$231.4 	$238.0 	$249.7 	$272.6 
Adjusted EBITDA Margin 	16.0% 	16.1% 	16.0% 	16.4% 
Adjusted EBITDAR 	$344.5 	$359.1 	$363.1 	$387.7 
Adjusted EBITDAR Margin 	23.9% 	24.3% 	23.3% 	23.3% 
OTHER FINANCIAL DATA: 
Interest Expense 	89.9 	89.9 	89.9 	89.5 
Capital Expenditures 	70.6 	83.1 	69.9 	60.2 
42 
KLC OpCo Historical Pro Forma and Projected Financial Summary 
($ in millions, except for weekly tuition) 	Fiscal Year Ended December 31, 
2004PF1 	2005PF1 	2006P 	2007P 
OPERATIONAL DATA: Revenue Revenue Growth 	$1,442.2 	$1,477.7 2.5% 	$1,557.8 5.4% 	$1,656.5 6.3% 
Gross Profit 	$233.3 	$244.4 	$290.7 	$320.6 
Adjusted EBITDA2 	$143.3 	$149.9 	$161.7 	$179.9 
Adjusted EBITDA Margin 	9.9% 	10.1% 	10.4% 	10.9% 
Adjusted EBITDAR 	$352.8 	$367.4 	$371.4 	$391.4 
Adjusted EBITDAR Margin 	24.5% 	24.9% 	23.8% 	23.6% 
OTHER FINANCIAL DATA: 
Interest Expense 	$23.5 	$23.5 	$23.6 	$23.5 
Capital Expenditures 	70.6 	83.1 	69.9 	60.2 
# of Centers 	2,021 	1,934 	1,894 	1,878 
Average Weekly Tuition 	$156.61 	$167.35 	$173.68 	$179.99 
Utilization 	61.6% 	61.2% 	62.2% 	63.0% 
KLC PropCo Historical Pro Forma and Projected Financial Summary 
Fiscal Year Ended December 31, 
($ in millions) 	2004Pr 	2005Pr 	2006P 	2007P 
OPERATIONAL DATA: 
Rental Revenue From KLC OpCo 	$96.3 	$96.3 	$96.3 	$96.3 
Other Rental Revenue 	0.0 	0.0 	0.0 	4.6 
Total Revenue 	$96.3 	$96.3 	$96.3 	$100.9 
Operating Expenses 	$8.3 	$8.3 	$8.3 	$8.3 
EBITDA 	$88.1 	$88.1 	$88.1 	$92.6 
OTHER FINANCIAL DATA: 
Interest Expense 	$66.4 	$66.4 	$66.3 	$66.0 
/r12 Historical and Projected Financial Summary 
($ in millions) 	Fiscal Year Ended June 30, 
2004 	2005 	2006P 	2007P 
OPERATIONAL DATA: 
Revenue4 	$71.4 	$85.3 	$116.0 	$132.2 
Revenue Growth 	19.5% 	36.0% 	14.0% 
EBITDA 	($1.9) 	$2.2 	$5.7 	$12.3 
EBITDA Margin 	(2.6)% 	2.6% 	4.9% 	9.3% 
OTHER FINANCIAL DATA: 
Capital Expenditures 	$4.3 	$4.9 	$9.4 	$15.0 
# of States Served 	11 	11 	12 	14 
# of Students 	10,811 	14,144 	18,267 	24,000 
Pro forma for the effects of the acquisition of KinderCare in January 2005 and the separation of KLC into KLC OpCo and KLC PropCo in 
November 2005, as if those transactions and related financing had occurred on January 1, 2004. 
2 EBITDA and EBITDAR are adjusted for restructuring charges, closed center costs, (gains) / losses on center sales, (gains) / losses on minority 
investment, dividend income, IDS expenses, estimated parallel organization costs, management fees, KLC OpCo's long term incentive plan and 
Knowledge School Inc.'s SAR Plan-related costs allocated to KLC. See also "Management's Discussion and Analysis of KLC's Pro Forma Results 
of Operations" and "The Real Estate Company (KLC PropCo) - KLC PropCo Summary Financial Information and Projections Discussion." 
3 Does not include the reinvestment of real estate revenues. Please refer to "The Real Estate Company (KLC PropCo)" for this information. 
4 Includes only states in which virtual academies are operated. Includes Washington, D.C. 
43 
6. RISK FACTORS 
Investment in the Units involves a substantial degree of risk and should be regarded as speculative. As a 
result, the purchase of the Units should be considered only by persons who can reasonably afford a loss 
of their entire investment. Prospective investors should carefully consider, in addition to matters set forth 
elsewhere in this Memorandum, the following factors relating to the business of the Company and this 
offering. The order in which risk factors appear is not intended as an indication of the relative weight or 
importance thereof. Prospective investors should carefully review all risk factors. Such information is 
presented as of the date hereof and is subject to change without notice. The discussion in this 
Memorandum contains forward-looking statements that involve risks and uncertainties. Actual results 
may differ significantly from the results discussed in the forward-looking statements. Factors that could 
cause or contribute to such differences include, but are not limited to, those discussed below. The 
occurrence of any of these factors could materially and adversely affect the Company's results of 
operations or cash flow. Risks described herein that could affect KLC are also likely to be similar for other 
pre-K-12 businesses we may acquire or develop. Other businesses we acquire or develop in foreign 
countries or in different markets, may be subject to risks in addition to those discussed below. 
6.1. Risks Related to Our Business 
6.1.1 Risks associated with growth through acquisitions; potential inability to 
consummate transactions 
A principal component of the Company's growth strategy is the acquisition of other businesses or interests 
therein that will complement and/or expand the Company's businesses and the products and services that 
they offer. The successful implementation of this strategy will depend upon a number of factors, including 
the ability to identify attractive acquisition opportunities, consummate such transactions on favorable 
terms and integrate the operations of the acquired businesses with those of the Company. Identifying, 
completing and realizing on attractive acquisitions are highly competitive and involves a high degree of 
uncertainty. The Company will be competing for acquisitions with other companies, private equity firms, 
as well as individuals and others, which often results in increased acquisition prices. There can be no 
assurance that the Company will be able to identify suitable acquisition opportunities or that if identified, 
the Company will be able to consummate such transactions on suitable terms, or that acquired 
businesses will perform as expected or generate returns. 
In addition to risks facing education companies similar to those facing KLC as described herein, 
acquisitions of businesses also involve special risks, including risks associated with unanticipated 
liabilities and contingencies, diversion of Company management attention and possible adverse effects 
on earnings resulting from increased amortization of goodwill, increased interest costs, the issuance of 
additional securities and difficulties related to the integration of the acquired business. No assurance can 
be given as to the success of the Company in executing and integrating acquisitions in the future. The 
Company's failure or inability to successfully implement and manage its acquisition strategy would have a 
material adverse effect on the Company's financial condition, results of operations and business. 
The Company may from time to time enter into negotiations in anticipation of consummating an 
acquisition transaction. However, there is no assurance that such negotiations will be successful and the 
diversion of management attention on such unsuccessful transactions may adversely affect 
managements ability to pursue other business opportunities. 
In addition, KLC PropCo intends to acquire diversified real estate interests, including investments in non-
education related properties. The performance of this acquisition strategy in general, or of any particular 
property, cannot be predicted. 
44 
The initial closing of this offering will require a minimum investment (including the amount attributable to 
KUE LLC through conversion of its preferred limited partner units, including accrued dividends at the 
option of KUE LLC, into Common LP Units) of U.S. $280.0 million. There can be no assurance of 
additional closings after the initial closing of the offering, whether before the completion of the Offering 
Period on March 31, 2007 or thereafter. Unless there are subsequent closings or offerings, cash 
available for acquisitions and expansion would be limited to available cash of KLC and KUE and proceeds 
of future financings of KLC and KUE. 
6.1.2 The Company plans to acquire or invest in non-U.S. companies. This 
international expansion strategy is untested, and may include acquisitions or 
developments in countries where for-profit education is not well established 
Foreign acquisitions involve certain risks not typically associated with U.S. acquisitions, including risks 
relating to (i) currency exchange matters, including fluctuations in the rate of exchange between the U.S. 
dollar and the various foreign currencies in which the Company's non-U.S. interests are denominated, 
and costs associated with conversion from one currency into another; (ii) differences between the U.S. 
and foreign securities markets, including potential price volatility in and relative illiquidity of some foreign 
securities markets, the absence of uniform accounting and financial reporting standards and disclosure 
requirements and less governmental supervision and regulation; (Hi) certain economic and political risks, 
including potential restrictions on foreign acquisition and repatriation of capital, and the risks of political, 
economic or social instability and the possibility of expropriation or confiscatory taxation; (iv) the possible 
imposition of foreign taxes on income and gains; and (v) differences in applicable legal systems, including 
the possibility that the Company may experience difficulty in asserting legal claims or obtaining legal 
remedies against sellers of businesses in foreign jurisdictions. 
The Company's prior operating history is limited to its U.S.-based businesses. Historical results may not 
be indicative of future performance outside the U.S. The Company's non-U.S. businesses may operate in 
countries in which the legal and regulatory frameworks, customary business models, education practices 
and philosophies and political and social norms are substantially different from those in the U.S. 
International expansion may also involve significant market risks, and opportunities to realize synergies 
may be limited. There can be no assurance that the Company will be successful in its international 
expansion strategy. 
In addition, the Company may acquire businesses or pursue business development opportunities in 
countries where for-profit education is not well-established, which may involve greater risks than those 
associated with similar U.S. acquisitions and developments. For example, the performance of a for-profit 
education company located in a country where for-profit education is in an embryonic stage may be 
volatile. Such a company also may be unable to achieve the growth or success achieved by education 
businesses in countries, such as the U.S., where for-profit education is more established. In addition, 
there can be no assurance that for-profit education will ever become well-established or maintain viability 
in any given country. If any of the above events occur, the Company may suffer a partial or total loss of 
capital invested in that business or development. 
6.1.3 The Company's success depends on its ability to attract and retain skilled 
employees 
The success of the Company will depend in part on continued employment of senior management and 
other key personnel, particularly the Principals. See the discussion under the heading "The Company 
may not engage in certain businesses" below. If one or more senior management or key personnel 
become unable or unwilling to continue in their present positions, the business and operations of the 
Company would be disrupted. 
The success of the Company also depends on attracting and retaining highly trained financial, marketing 
and other personnel. The Company will need to continue to hire additional personnel as its business 
grows. The market for hiring such personnel is competitive and hiring such personnel may require 
increased salaries and enhanced benefits under certain circumstances. A shortage in the number of 
45 
skilled personnel could limit the ability of the Company to increase sales of existing products and services 
and launch new product offerings. 
6.1.4 The Company has significant leverage, and expects to incur additional debt, 
which could result in adverse effects on its financial condition 
The Company has significant leverage and expects to incur additional debt in connection with the 
acquisition and operation of its businesses. Although the Company intends to use leverage in a manner it 
believes to be prudent, the leveraged capital structure the Company plans to utilize may significantly 
increase the Company's exposure to adverse economic factors such as rising interest rates, downturns in 
the economy or deteriorations in the condition of the businesses or their respective industries. If a 
business cannot generate adequate cash flow to meet debt obligations, the Company may suffer a partial 
or total loss of capital invested in such business. 
The Company's ability to service its substantial indebtedness, and meet its other obligations depends on 
its future performance, which will be affected by financial, business, economic and other factors, many of 
which are outside the Company's control. The Company cannot be certain that its cash flow will be 
sufficient for such purposes. If the Company does not have enough liquidity, it may be required to 
refinance all or part of its existing debt, sell assets or borrow more money. The Company cannot 
guarantee that it will be able to do so on favorable terms, if at all. In addition, the terms of existing or 
future debt agreements, may restrict the Company from pursuing any of these alternatives. 
The substantial level of indebtedness incurred by the Company may have the following consequences of 
potential concern to investors in the Company: 
• The Company must use a substantial portion of its cash flow from operations to pay interest and 
principal on its indebtedness, which reduces the funds available for other business purposes such 
as capital expenditures; 
• The Company's ability to obtain additional financing for working capital, capital expenditures, 
acquisitions or general corporate purposes may be impaired; 
• The Company may be limited in its ability to borrow additional funds; 
• The Company may have a higher level of indebtedness than some of its competitors, which may 
put it at a competitive disadvantage and reduce its flexibility in planning for, or responding to, 
changing conditions in its industry, including increased competition; and 
• The Company may be more vulnerable to economic downturns and adverse developments than it 
would without the leverage. 
Adverse developments in the Company's financial condition would have adverse effects upon the 
business and results of the Company as a whole. 
6.1.5 The Company faces intense competition in the early childhood care and 
education services industry from numerous other types of providers 
The early childhood care and education services industry is competitive and highly fragmented. The most 
important competitive factors generally are quality, convenience and, to a lesser extent, price. The 
Company's, specifically KLC OpCo's, competition in this industry consists principally of: 
• other for-profit, center-based child care providers, including franchise organizations; 
• preschool, kindergarten and before and after school programs provided by public schools; 
46 
• local nursery schools and child care centers, including church-affiliated and other non-profit 
centers; 
• providers of child care services that operate out of homes; and 
• substitutes for group child care, such as relatives, nannies and stay-at-home parents. 
In many markets, the Company faces competition from preschool services and before and after school 
programs offered by public schools that provide such services at little or no cost to parents. The number 
of school districts offering these services is growing, and we expect increased competition from such 
services in the future. In addition, local nursery schools, child care centers and in-home providers 
generally charge less for their services than the Company. Many denominational and other non-profit 
child care centers have lower operating expenses than the Company and may receive donations and/or 
other funding to subsidize operating expenses. Consequently, operators of such centers often charge 
lower tuition rates than us. Moreover, fees for home-based care are normally substantially lower than 
fees for center-based care. 
6.1.6 The Company may acquire companies that are not well-established or are 
experiencing financial difficulties 
The Company may acquire less established companies. Acquisitions of interests in such companies may 
involve greater risks than are generally associated with acquisitions of more established or stable 
companies. For example, such companies may have shorter operating histories on which to predict 
future performance and may have negative cash flow. Their performance may be more volatile and they 
may be unable to sustain the growth rates or success achieved by established companies. In the case of 
start-up enterprises, such companies may not have significant or any operating revenues. Such 
companies also may have a lower capitalization and fewer resources (including cash) and may be more 
vulnerable to failure, resulting in the loss of the Company's entire investment in such company. In 
addition, less mature companies could be more susceptible to irregular accounting or other fraudulent 
practices. In such event, the Company may suffer a partial or total loss of capital invested in that 
company. 
The Company has invested in troubled companies in the past, and may make future investments in 
companies that are experiencing, or are expected to experience, financial difficulties. If such difficulties 
are not overcome, the Company may lose part or all of any equity investment in such companies. 
6.1.7 KUE will rely on the management teams of its subsidiaries 
While KUE will retain overall control and set the strategic direction of the Company, day-to-day operations 
at the subsidiary level will be the responsibility of the management teams at the subsidiary level. There 
can be no assurance that the existing management teams, or any successor, of any acquired business 
will be able to operate such business in accordance with KUE's plans and/or objectives. 
6.1.8 The Company has a non-controlling interest in k12 with limited rights as a 
shareholder and may acquire minority interests in other entities 
The Company holds a non-controlling interest in k12 and may in the future acquire minority interests in 
other companies. Holding a minority interest limits the Company's ability to protect its interests in and to 
influence management of k12. Any future investments in minority interests of other companies will likely 
involve similar limitations. 
In addition, the Company may co-acquire interests in businesses or develop businesses with third parties 
through joint ventures or other entities, which may have larger or controlling ownership interests in such 
companies. In such cases, the Company will rely significantly on the existing management and boards of 
directors of such companies, which may include representatives of other investors with whom the 
Company is not affiliated and whose interests may at times conflict with the interests of the Company. 
47 
Such interests may involve risks in connection with such third-party involvement, including the possibility 
that a third-party may be in a position to take (or block) action in a manner contrary to the Company's 
objectives or may have financial difficulties resulting in a negative impact on such interest. Acquisitions 
made with third parties in joint ventures or other entities also may involve carried interests and/or other 
fees payable to such third party partners or co-venturers. There can be no assurance that desirable 
minority shareholder rights will be available or that such rights will provide sufficient protection of the 
Company's interests. 
6.1.9 Certain of the Company's businesses may require additional capital 
Certain of the Company's businesses, especially those in development phases, may require additional 
financing to satisfy their working capital requirements. The amount of the additional financing needed will 
depend upon the maturity and objectives of the particular business. The Company may seek to raise any 
required capital from different sources, and subsidiaries in foreign countries may raise capital locally. The 
availability of capital is generally a function of capital market conditions that are beyond the control of the 
Company. There can be no assurance that the Company will be able to predict accurately the future 
capital requirements necessary for success or that additional funds will be available from any source as 
needed. An inability to timely raise capital may materially and adversely affect the Company and/or its 
business. 
6.1.10 KUE's subsidiaries operate in regulated industries; failure to comply with 
governmental regulation and licensing requirements could have a material 
adverse effect on operations 
The pre-K-12 education business is highly regulated and is often subsidized with government funding or 
reimbursement programs. In addition, KUE and its subsidiaries may require the consent or approval of 
applicable regulatory authorities in order to acquire or operate particular businesses, including in foreign 
jurisdictions where the Company has limited or no experience with the regulatory framework. Failure to 
comply with applicable laws or regulations, or failure or inability to obtain applicable approvals, could have 
a material adverse effect on the operations of KUE and/or its subsidiaries. 
For example, KLC's centers and school programs are subject to numerous state and local regulations and 
licensing requirements. KLC has policies and procedures in place to assist in complying with such 
regulations and requirements. Although these regulations vary from jurisdiction to jurisdiction, government 
agencies generally review, among other things, the fitness and adequacy of buildings and equipment, the 
ratio of staff personnel to enrolled children, staff training, record keeping, children's dietary program, the 
daily curriculum, and compliance with health and safety standards and transportation safety. In most 
jurisdictions, these agencies conduct scheduled and unscheduled inspections of the centers and licenses 
must be renewed periodically. Most jurisdictions establish requirements for background checks or other 
clearance procedures for new employees of child care centers and school programs. Repeated failures 
by any of KLC's centers to comply with applicable regulations may result in sanctions against that center 
or program and other centers or programs in the same jurisdiction, including probation or, in more serious 
cases, suspension or revocation of a center's or program's license to operate. In addition, this type of 
action could attract negative publicity extending beyond that jurisdiction. 
A licensing authority may determine that a particular center or program is in violation of applicable 
regulations and may take action against that center or program and possibly other centers or programs in 
the same jurisdiction. For more information, see The Operating Company (KLC OpCo) — Licensing and 
Government Regulation." 
6.1.11 Future legislation or new regulations may place additional burdens on the 
Company and have a material adverse effect on operations 
Additional, different and/or more stringent regulations and licensing requirements may become applicable 
in the future due to changes in laws and regulations, judicial or administrative interpretations of existing 
laws and regulations, changes in the Company's business strategy or for other reasons. State authorities 
48 
routinely review the adequacy of regulatory and licensing requirements and may implement changes that 
significantly increase operating costs. For example, a change in the required ratio of child center staff 
personnel to enrolled children in a certain jurisdiction could increase KLC center or program staff 
operating expenses in that jurisdiction and therefore have a material adverse effect on KLC's operations. 
There can be no assurance that the Company will be able to (i) obtain all required regulatory approvals 
that it does not yet have or that it may require in the future; (i) obtain any necessary modifications to 
existing regulatory approvals; or (iii) maintain required regulatory approvals. Delay in obtaining or failure 
to obtain and maintain in full force and effect any regulatory approvals, or amendments thereto, or delay 
or failure to satisfy any regulatory conditions or other applicable requirements, could prevent operation of 
the facility or sales to third parties, or could result in additional costs to the Company. 
6.1.12 Conflicts of interest may arise with the Principals and their affiliates 
The Principals will agree (on behalf of themselves and their affiliates) that KUE will be their exclusive 
vehicle for equity investment opportunities in and acquisitions of for-profit companies engaged primarily in 
the business of pre-K through 12th grade education of children (other than companies in which the 
Principals or their affiliates directly or indirectly owns fifteen percent (15%) or more of the voting stock (or 
similar voting interests) as of the date of the first closing of the offering, which are LeapFrog Enterprises, 
Inc. and Nobel Learning Communities, Inc.). The Principals will not acquire or make an equity investment 
in such companies unless such acquisition or investment opportunity has been first presented to the 
Independent Committee and subsequently declined by the Independent Committee or initially pursued but 
later abandoned by KUE. See "The Structure of KUE and the General Partner — Investment in 
Subsidiaries and Joint Ventures." In addition, existing companies in which KULG and/or its principals are 
investors along with other unrelated investors may invest in or acquire companies involved in areas 
relating to education. 
Following the consummation of the offering, the Principals will control the General Partner other than with 
respect to certain actions requiring Investor approval as further described in "The Structure of KUE and 
the General Partner." Conflicts could emerge between the Principals and the Company in the future, 
including conflicts due to the other business segments in which the Principals may have interests, 
separate from the Company. In addition, affiliates of the Principals will have certain financial interests in 
KUE and certain of its subsidiaries as described in "Related Party Transactions" following the 
consummation of the offering independent of their ownership of the Units, which may present conflicts of 
interest. 
Certain other potential conflicts of interest include: 
• Other activities of management — the Principals and other senior management personnel of the 
Company are subject to a variety of prior and continuing obligations unrelated to the Company. 
Accordingly, conflicts may arise in the allocation of management time and resources. 
• Lack of separate counsel for Investors — no separate counsel has been engaged by the Company 
to act on behalf of Investors in the Company. 
• For a description of existing arrangements between the Company and its affiliates, see "Related 
Party Transactions." 
• For a description of certain restrictions on one of the Principals and the Company, see "The 
Company may not engage in certain businesses" below. 
By acquiring an interest in the Company, each Investor will be deemed to have acknowledged the 
existence of any such actual or potential conflicts of interest and to have waived any claim with respect to 
any liability arising from the existence of any such conflict of interest. 
49 
6.1.13 The Company may not engage in certain businesses 
On February 24, 1998, without admitting or denying liability, Michael R. Milken consented to the entry of a 
final judgment in the U.S. District Court for the Southern District of New York in Securities and Exchange 
Commission v. Michael R. Milken et al., which judgment was entered on February 26, 1998 restraining 
and enjoining Michael Milken from associating with any broker, dealer, investment advisor, investment 
company or municipal securities dealer, and from violating Section 15(a) of the Securities Exchange Act 
of 1934, as amended (the "Exchange Act"). On March 11, 1991, in the action entitled In the Matter of 
Michael R. Milken, the SEC instituted a proceeding pursuant to Section 15(b)(6) of the Exchange Act and 
ordered that Michael Milken be barred from association with any broker, dealer, investment advisor, 
investment company or municipal securities dealer. On April 24, 1990, concurrently with a plea agreement 
covering criminal violations of federal securities laws, Michael Milken also consented, without admitting or 
denying liability, to the entry of a final judgment in the U.S. District Court for the Southern District of New 
York in the civil action entitled Securities and Exchange Commission v. Drexel Burnham Lambert 
Incorporated, et al., restraining and enjoining Michael Milken from engaging in transactions, acts, 
practices and courses of business which constitute or would constitute violations of, or which aid and abet 
or would aid and abet violations of, Sections 7(c), 7(f), 9(a)(2), 10(b), 13(d), 14(e), 15(c)(3) and 17(a)(1) of 
the Exchange Act, and Regulations T and X and Rules 10b-5, 10b-6, 13d-1, 13d-2, 14e-3, 15c3-1, 17a-3 
and 17a-4 promulgated thereunder, and Section 17(a) of the Securities Act. 
The Company cannot be in the business of or associated with a broker, dealer, investment company, 
investment advisor, or municipal securities dealer (collectively, "prohibited businesses"). As a result, the 
Company cannot pursue any acquisitions or investments that may have the effect of the Company being 
in any prohibited business. This could adversely affect the Company's ability to make and/or hold 
investments or acquisitions which may otherwise be consistent with its business objectives. 
6.1.14 Litigation and adverse publicity concerning alleged incidents at KLC or other 
child care centers could hurt KLC's reputation 
KLC is subject to claims and litigation arising in the ordinary course of business, including claims and 
litigation involving allegations of physical or sexual abuse of children. Any such allegations, claims or 
lawsuits, either individually or in the aggregate, may have a material adverse effect on KLC OpCo's 
financial position, operating results or cash flows. 
Personal trust and parent referrals play a key role in the child care business. KLC believes its success is 
directly related to its reputation and favorable brand identity. KLC is periodically subject to claims and 
litigation alleging negligence, inadequate supervision and other grounds for liability arising from injuries or 
other harm to children. In addition, claimants may seek damages from KLC for child abuse, sexual abuse 
or other criminal acts arising out of alleged incidents at KLC's centers. There are lengthy statute of 
limitations periods applicable to child abuse and personal injury claims. Such claims may typically be 
brought until a number of years after a claimant reaches the age of majority. Any adverse publicity 
concerning such incidents at one of KLC's child care centers, or child care centers generally, could greatly 
damage KLC's reputation and could have an adverse effect on occupancy levels at KLC's centers. 
6.1.15 KLC's insurance policies may be inadequate to cover claims, and KLC may be 
unable to maintain existing coverage in the future at reasonable prices 
Some operators of child care centers have experienced difficulty obtaining general liability insurance or 
other liability insurance that covers child abuse. KLC maintains insurance policies to protect against 
relevant liability exposures in amounts KLC considers to be appropriate. In addition, KLC's owned 
centers are covered by blanket insurance policies, including property insurance. Although KLC has not 
historically had to pay any claims exceeding its coverage, claims in excess of, or not included within, its 
coverage may be asserted. To the extent that any claims are not covered by insurance, KLC will be 
forced to cover the associated costs itself, which will reduce the amount of cash KLC has available for 
other business purposes. 
50 
Insurance premiums have increased significantly in the past and may increase in the future because of 
market conditions in the insurance business generally, conditions in the child care industry more 
particularly or KLC's situation specifically. KLC cannot be certain of the cost or coverage it will obtain with 
replacements of existing policies, which will depend on the factors described above. 
6.1.16 Factors beyond the Company's control, such as economic conditions, may 
adversely affect the demand for child care services 
Demand for child care services is subject to fluctuations in general economic conditions, and the 
Company's revenues depend, in part, on the number of working mothers and working single parents who 
require child care services. Recessionary pressure on the economy, and a consequent reduction in the 
general labor force, may adversely impact the Company because out-of-work parents tend to stop using 
child care services. In addition, certain demographic trends which are favorable to the Company's 
business, including the increasing percentage of mothers in the workforce and the growth in population of 
children of the age needing child care, as well as trends in the preference of working parents and 
employers for center based child care, may not continue. Other factors beyond the Company's control 
could adversely affect demand, such as terrorism, natural disasters and epidemics. 
Children attending KLC's facilities are generally enrolled on a weekly basis. Accordingly, any change in 
economic conditions or other external factors affecting demand will impact us more quickly than 
businesses with longer contractual periods. 
6.1.17 A loss or reduction of government funding for child care assistance programs or 
food reimbursement programs could adversely affect KLC 
Federal and state child care assistance programs accounted for approximately 20% of KLC's revenues 
during the one year period ended December 31, 2005. These funds are primarily from the Child Care 
and Development Block Grant and At Risk Programs, which are designed to assist low-income families 
with child care expenses and are administered through various state agencies. Although additional 
funding for child care may be available for low income families as part of welfare reform and the 
reauthorization of the Child Care and Development Block Grant and At Risk Programs, KLC may not 
benefit from any such additional funding. 
KLC is eligible to participate in the Child and Adult Care Food Program, or CACFP, which provides 
reimbursement for meals and snacks that meet certain USDA approved nutritional guidelines. Centers 
can qualify to participate in the CACFP by meeting one of two tests: 25% or more of the enrolled students 
receive child care assistance funding or 25% or more of the center's customers have household incomes 
that are at or below state specified income levels. Reimbursement is calculated based on the percentage 
of the center's customers that fall into a "free" or "reduced" income category established by the state. 
Federal or state child care assistance programs may not continue to be funded at current levels, 
particularly with large budget deficits putting pressure on discretionary spending programs. In addition, 
many states have recently experienced fiscal problems and have reduced or may in the future reduce 
spending on social services. A termination or reduction in funding of child care assistance programs 
could have a material adverse effect on KLC's business. 
Adverse changes to the national or local economies may result in an increase in the number of families 
eligible for child care assistance. In order to compensate for such increases, state or local governments 
have in the past, and may in the future, increased parent co-payments required under such programs or 
change the eligibility requirements to reduce the number of families eligible to participate in such 
programs. An increase in the required parent co-payments may discourage parents from sending their 
children to KLC's centers. An increase in required parent co-payments also increases KLC's exposure to 
the risk of non-payment by these parents. 
In addition, states which reduce funding for child care may be unable to qualify to receive funds under the 
Temporary Assistance for Needy Families, or TANF, program. Such states may utilize funds under the 
51 
Child Care and Development Block Grant to provide child care assistance to needy families in lieu of 
TANF funds, thereby reducing the amount of funds available to other families, including families that 
utilize KLC's child care centers. 
6.1.18 A termination or reduction of tax credits for child care could have a material 
adverse effect on KLC's business 
KLC may enjoy heightened demand for its services because of tax incentives for child care programs. 
Section 21 of the Internal Revenue Code of 1986, as amended (referred to herein as the "Code"), 
provides a federal income tax credit ranging from 20% to 35% of specified child care expenses with 
maximum eligible expenses of $3,000 for one child and $6,000 for two or more children. The fees paid to 
KLC by eligible taxpayers for child care services qualify for these tax credits, subject to the limitations of 
Section 21 of the Code. However, these tax incentives are subject to change. 
Code Section 45F provides incentives to employers to offset costs related to employer provided child care 
facilities. Costs related to (a) acquiring or constructing property used as a qualified child care center, (b) 
operating an existing child care center, or (c) contracting with an independent child care operator to care 
for the children of the taxpayer's employees will qualify for the credit. The credit amount is 25% of the 
qualified costs. An additional credit of 10% of qualified expenses for child care resource and referral 
services has also been enacted. The maximum credit available for any taxpayer is $150,000 per tax year. 
Many states offer tax credits in addition to the federal credits discussed above. Credit programs vary by 
state and may apply to both the individual taxpayer and the employer. A termination or reduction of such 
tax credits could have a material adverse effect on KLC's business. 
6.1.19 Material weaknesses in KLC's internal controls were discovered during KLC's 
2005 audit 
For a discussion of certain material weaknesses in KLC's internal controls discovered in KLC's 2005 audit, 
see "KLC: Management's Discussion and Analysis of Financial Condition and Results of Operations for 
the Fiscal Years Ended 2005, 2004 and 2003" in Appendix B. To address these issues, and as part of 
the Company's growth plan, KLC is increasing expenditures on IT systems and accounting and IT 
personnel. 
6.1.20 If KLC is unable to attract and retain sufficient numbers of qualified employees, if 
minimum wage rates increase or if KLC's employees unionize, KLC's results of 
operations may be adversely affected 
KLC believes that its success is largely dependent on its ability to attract and retain qualified employees. 
Many of KLC's child care center staff are entry level wage earning employees, and turnover in this 
industry has traditionally been significant. If KLC is unable to hire or retain sufficient numbers of qualified 
employees (particularly center directors and supervising employees) or are only able to hire or retain such 
employees by providing significantly greater salaries, wages and benefits than KLC currently does as a 
result of increases in the federal or state minimum wage rates or other market conditions, KLC's 
operations may be adversely affected. 
Since early 1998, union organization efforts in the child care industry have received considerable 
publicity. While union officials associated with the American Federation of State, County and Municipal 
Employees and Service Employees International have repeatedly announced their intention to engage in 
a nation-wide effort to organize child care workers, organization efforts have been focused on 
government-funded providers. To date, efforts to organize employees of for-profit providers have been 
minimal. However, organizational efforts may occur and, if successful, could have an adverse effect on 
KLC's relationships with employees and KLC's labor costs. In addition, the general publicity surrounding 
such efforts, even if not focused on KLC's centers, could result in increased wages for child care workers 
and, as a result, increase KLC's labor costs. 
52 
6.1.21 Because KLC (through KLC PropCo) owns or leases a substantial number of real 
properties, and expects to invest in additional properties, results of operations 
could be adversely affected if environmental contamination is discovered on any 
of the properties 
KLC is subject to U.S. federal, state and local environmental laws, regulations and ordinances that may 
impose liability for damages resulting from past spills, disposals and other releases of hazardous 
substances as well as clean up costs. In particular, under applicable environmental laws, KLC may be 
responsible for investigating and remediating environmental conditions and may be subject to associated 
liability, including lawsuits brought by private litigants, relating to KLC's properties. These obligations 
could arise whether KLC owns or leases the property at issue and regardless of whether the 
environmental conditions were created by KLC or by a prior owner or tenant. Environmental conditions 
unknown to KLC at this time relating to prior, existing or future properties may be discovered and may 
have a material adverse effect on KLC's results of operations. 
6.1.22 KUE has a limited history 
While certain subsidiaries of KUE have a financial and an operating history, KUE has only recently been 
organized and has relatively little financial or operating history upon which prospective investors may 
evaluate its performance, and has not prepared separate or consolidated financial statements. The prior 
performance of the subsidiaries of KUE described herein may not be indicative of the future results of the 
Company. 
6.2. Tax Risks 
6.2.1 Certain tax considerations generally applicable to Investors subject to U.S. tax 
liability 
KUE is expected to be treated as a partnership for U.S. federal income tax purposes. Each Investor that 
is subject to U.S. federal income tax liability will take into account its allocable share of items of income, 
gain, loss, deduction, and credit of KUE (as determined under the Limited Partnership Agreement), 
without regard to whether it has received distributions from KUE. As a result, the tax liability to an 
Investor resulting from such allocation may exceed the cash distributions made by KUE to the Investor. 
Further, upon the sale of its Common LP Units, an Investor may, depending on the amount of Company 
debt, if any, and the Investor's adjusted tax basis, incur a tax liability in excess of the amount of cash 
received. 
The U.S. Internal Revenue Service (the "IRS"), or other taxing authority may challenge the manner in 
which income, gains, losses and deductions are allocated to holders of Common LP Units, the General 
Partner and holders of the Profits Participation LP Units under the Limited Partnership Agreement. For 
U.S. federal income tax purposes, allocation of any item of income, gain, loss or deduction to a partner in 
a partnership will be given effect so long as the allocation has "substantial economic effect," or is 
otherwise in accordance with the partner's interest in the partnership. If an allocation of an item pursuant 
to the Limited Partnership Agreement does not satisfy this standard or is deemed not to satisfy this 
standard by the IRS, it will be reallocated by the IRS among the Partners on the basis of their respective 
interests in KUE (as determined by the IRS), taking into account all facts and circumstances. In such a 
case, Investors could have additional tax liabilities or suffer adverse tax consequences. 
An investment in KUE will give rise to a variety of complex U.S. federal income tax and other tax issues 
for Investors. Certain of those issues may relate to special rules applicable to certain types of Investors 
subject to U.S. tax, such as tax-exempt entities, foundations, life insurance companies, banks, dealers, in 
securities, U.S. persons who own 10% or more of KUE and non-U.S. persons and entities. Prospective 
Investors are urged to consult their tax advisors with specific reference to their situations concerning an 
investment in KUE. 
53 
6.2.2 Tax-Exempt and Non-U.S. Investors may become subject to U.S. Tax 
KUE business activities could generate income that will be taxable to certain otherwise tax-exempt 
Investors as "unrelated business taxable income." Although, under the Limited Partnership Agreement, 
the General Partner is required to use its reasonable best efforts not to engage in, or invest in (other than 
through an entity that is not a pass-through entity) a pass-through entity that engages in, any activity 
which constitutes the conduct of a trade or business in the United States and generates income which 
constitutes "effectively connected income" in the hands of the non-U.S. Investors that own Common LP 
Units, it is possible that some of KUE's business activities and acquisitions could generate income that is 
"effectively connected" with a U.S. trade or business which could create U.S. federal income tax reporting, 
tax liability, and tax withholding for non-U.S. Investors. Additionally, KUE believes that neither KUE nor 
its subsidiaries is currently a U.S. Real Property Holding Corporation ("USRPHC") for U.S. federal income 
tax purposes. However, no assurances can be given in this regard. Furthermore, it is possible that in the 
future KUE and/or its subsidiaries may become a USRPHC if, for example, the value of the U.S. real 
estate holdings of KUE or such subsidiary increases sufficiently. A disposition of an interest in a 
USRPHC could create gain for non-U.S. Investors which would be treated as if the non-U.S. Investor 
were engaged in a trade or business within the U.S. and as if such gain were effectively connected with 
such trade or business. This would create U.S. federal income tax reporting, tax liability and withholding 
for non-U.S. Investors. Investors that are non-U.S. persons are urged to consult their tax advisors 
regarding the potential application of the USRPHC rules to their investment in KUE. 
6.2.3 Investors may become subject to taxation in non-U.S. jurisdictions 
KUE expects to make investments in jurisdictions outside of the U.S., and KUE, its subsidiaries and/or the 
Investors may be subject to income or other tax in those jurisdictions. In addition, local tax incurred in 
non-U.S. jurisdictions by KUE or subsidiaries through which it invests may not entitle Investors to either (i) 
a credit against tax that may be owed in the U.S. or their respective local tax jurisdictions, or (ii) a 
deduction against income taxable in the U.S. or such local jurisdictions by the Investors. 
6.2.4 Controlled Foreign Corporations 
KUE anticipates that it and/or its subsidiaries will invest in non-U.S. operations. Depending upon the 
percentage of ownership of such operations by KUE and its subsidiaries and the type of legal entity 
chosen for such operations, these non-U.S. operations could be classified as a Controlled Foreign 
Corporation ("CFC") for U.S. federal income tax purposes. If an entity is classified as a CFC, certain 
types of income could be taxable to U.S. persons owning 10% or more of KUE for U.S. income tax 
purposes, even if no distributions of cash are made from such entity, and gain from the disposition of 
such entity would be taxed as if it were a dividend to the extent of such entity's earnings and profits, 
rather than as a capital gain, for U.S. income tax purposes. 
6.2.5 Treatment of KUE as a U.S. Entity 
Under the Code, certain non-U.S corporations may be treated as U.S. corporations for U.S. federal 
income tax purposes, thereby subjecting such non-U.S. corporations to U.S. federal income tax on their 
income. Recently enacted U.S. tax legislation includes one such provision. Under this legislation, 
referred to as the anti-inversion legislation, non-U.S. corporations that acquire interests in a U.S. 
corporation or partnership and meet certain ownership, operational and other tests may be treated as U.S. 
corporations for federal income tax purposes. The legislation grants broad regulatory authority to the U.S. 
Secretary of Treasury to provide such regulations as may be appropriate to determine whether a non-U.S. 
corporation is treated as a U.S. corporation or as are necessary to carry out the intent of the provision, 
including adjusting its application as necessary to prevent the avoidance of its purpose. Recently issued 
Treasury regulations provide that the anti-inversion legislation is applicable to a foreign partnership that is 
or becomes a "publicly traded partnership" within two years of the acquisition by it of a U.S. corporation. 
A "publicly traded partnership" is any partnership (i) interests in which are traded on an established 
securities market, or (ii) interests in which are readily tradable on a secondary market (or the substantial 
equivalent thereof). KUE believes that it is not currently a publicly traded partnership and does not intend 
54 
to become a publicly traded partnership within two years of this offering or the acquisition of KLC and k12. 
As a result, KUE does not believe the anti-inversion legislation or any regulations promulgated within the 
scope of the legislation's regulatory authority should apply to KUE although no assurance can be given in 
this regard or with respect to any new acquisitions of or investments in U.S. corporations. In addition, 
KUE does not believe that any other Code provision subjecting non-U.S. corporations to U.S. federal 
income tax should apply to KUE or its subsidiaries, although no assurance can be in this regards. The 
promulgation of contrary regulations or a successful challenge of either of these positions by the Internal 
Revenue Service could materially reduce a holder's after-tax return and, thus, could result in a substantial 
reduction of the value of the Units. 
6.2.6 Currency Fluctuations 
An investment in KUE is a U.S. dollar denominated investment. Contributions to and distributions from 
KUE will be made in U.S. dollars. Fluctuations in value between the U.S. dollar and the Investor's 
functional currency (if other than the U.S. dollar) may result in taxable income to the Investor. 
6.2.7 Reporting Requirements 
Investors who are U.S. Persons will be required to file an IRS Form 8865 with the Investor's U.S. federal 
income tax return for the taxable year in which the Investor purchases the Common LP Units. Investors 
who are U.S. Persons may, depending upon the size of their investment in the General Partner, be 
required to file an IRS Form 5471 with the Investor's U.S. federal income tax return for the taxable year in 
which the Investor purchases Class A ordinary shares in the General Partner. Additionally, depending on 
the type of non-U.S. investments KUE makes, Investors who are U.S. Persons may be required to file 
additional IRS Forms such as a Form 5471 in subsequent years. 
6.3. Risks Related to Projections 
6.3.1 The projections included in this Memorandum and otherwise provided to 
potential Investors are subject to a number of assumptions and uncertainties; 
potential Investors are cautioned not to place undue reliance on such projections 
The projections included in this Memorandum and other models and forecasts that may be presented to 
or discussed with Investors represent management's best estimates as of the date of this Memorandum 
of KLC's, KLC OpCo's and KLC PropCo's projected results of operations for the years ended December 
31, 2006 to 2011 (the "Projections"). The Projections were not prepared with a view toward compliance 
with published guidelines of the SEC, the American Institute of Certified Public Accountants, or any 
regulatory or professional agency or body or generally accepted accounting principles of the U.S. or any 
other country. In addition, neither the Agents, Deloitte & Touche LLP, the Company's independent 
auditors, nor any other independent expert, accountant or counsel has examined, reviewed or compiled 
the Projections and, consequently, assume no responsibility for them. The Projections should be read 
together with, and are qualified in their entirety by, the information contained in the rest of this "Risk 
Factors" section, "Management's Discussion and Analysis of KLC's Pro Forma Results of Operations," 
"Business" and the financial statements and the related notes thereto included in this Memorandum. 
The Projections do not include any expenses of any entity within the Company above the KLC level, 
including KUE expenses ($17.5 million of the $20.0 million payable pursuant to the Fixed Overhead 
Payment Agreement) that will be payable by KUE for administrative and other services. See "Related 
Party Transactions." The Projections also do not include any projected expenses relating to grants of 
Profits Participation Units or other equity-related grants, including for the Stock Appreciation Rights Plan 
at Knowledge Schools, Inc. ("KSI"), pursuant to which payments may be made based on different 
valuations of KSI stock and are based on the same multiples of Adjusted EBITDA used in 2005; actual 
valuations are conducted annually and may be higher or lower. Finally, the Projections do not reflect 
projected interest expenses on KUE debt. 
55 
The Projections do not assume that the Company will make any future material acquisitions, even though 
the Company expects to use the proceeds of the sale of the Units, among other purposes, for 
acquisitions, which will likely affect actual performance and cause it to differ from the Projections. The 
Projections assume the success of the Company's operating strategy, although no assurance can be 
given that the Company's strategy will be effective or that the anticipated benefits from the strategy will be 
realized in the periods for which the Projections have been prepared. The assumptions described herein 
are those that the Company believes are most significant to the Projections; however, not all assumptions 
used in preparing the Projections have been set forth herein. 
The Projections, in general, assume that: (i) the Company will not be negatively or positively impacted by 
any material legal proceedings; (ii) there will be no material change in any of the Company's existing 
contracts or leases; (iii) there will be no change in generally accepted accounting principles in the U.S. 
that will have a material effect on the financial results of the Company; (iv) there will be no labor disputes, 
natural disasters, acts of terrorism, epidemics (such as avian flu) or other disturbances that would 
materially affect the operations or revenues of the Company; and (v) that worldwide economic conditions 
and economic conditions in the U.S. remain generally favorable and consistent with those prevailing on 
the date of this Memorandum. 
The Projections are based upon a number of assumptions and estimates that, while considered 
reasonable by management, are inherently subject to significant business, economic and competitive 
risks, uncertainties and contingencies which are beyond the control of KLC, and upon assumptions with 
respect to future business decisions which are subject to change. Accordingly, the Projections are only 
an estimate, and actual results will vary from the Projections, and these variations may be material. 
Consequently, the inclusion of the Projections herein should not be regarded as a representation of the 
Company, its advisors, the Agents, or any other person of results that will actually be achieved. 
Projections are necessarily speculative in nature, and it is usually the case that one or more of the 
assumptions in projections do not materialize. Prospective purchasers of the Units are cautioned not to 
place undue reliance on the Projections. 
The limited k12 projections contained in this Memorandum were received from k12 management and 
were not prepared by the Company or its management. 
The Company does not intend to update or otherwise revise the Projections to reflect circumstances 
existing after the date hereof or to reflect the occurrence of unanticipated events, even in the event that 
any or all of the underlying assumptions do not come to fruition. Furthermore, the Company does not 
intend to update or revise the Projections to reflect changes in general economic or industry conditions. 
6.4. Risks Related to Investing in the Units 
6.4.1 There will be significant unallocated net proceeds from the offering 
If there are additional closings after the initial closing of the offering, after repayment of KUE's debt, a 
significant amount of the anticipated net proceeds from the offering of the Units may not have been 
designated for specific uses. Therefore, the Company's management will have broad discretion within 
the business scope of the Company with respect to the use of the net proceeds of the offering. There can 
be no assurance that the uses of proceeds will benefit the Company or Investors. 
6.4.2 Investors will only have limited rights to receive ongoing information about the 
Company 
Other than as expressly provided in the Limited Partnership Agreement of KUE (the "Limited Partnership 
Agreement), the Company does not expect to provide ongoing detailed information regarding its 
business, financial condition or results of operations to Investors. The Limited Partnership Agreement 
provides that Investors shall receive yearly audited financial statements of the Company, as well as semi-
56 
annual reports on the Company's operations. In addition, Investors have the right to access certain other 
information regarding the Company as provided for in the Limited Partnership Agreement. As long as the 
Units are not registered under the Exchange Act, the Company will not be subject to the reporting 
requirements thereunder. KLC's 2005 audit was not completed until May 2006 due to systems 
conversion issues. 
6.4.3 Investors may never receive cash distributions on their investment; there is no 
assurance of investment return 
There is no assurance that KUE will be able to generate returns for the Investors or that returns will be 
commensurate with the risks of investing in KUE. There may be limited or no cash flow available to KUE 
from its subsidiaries or to the Investors from KUE and there can be no assurance that KUE will make any 
distributions to Investors. KUE is not obligated to declare cash distributions with respect to the Units 
other than certain distributions to meet tax obligations of the Investors. Public offerings, sales or other 
dispositions which may result in a return of capital or the realization of gains, if any, are not expected to 
occur for a number of years. An investment in KUE should only be considered by persons who can 
reasonably afford a loss of their entire investment. 
6.4.4 KUE's ability to make distributions is limited by its subsidiaries' existing and 
future indebtedness 
KUE will not have any material assets other than its ownership of various subsidiaries (including KLC) 
and investments in other companies, and will not have any material operations or revenues other than 
income derived from KUE's interest in its subsidiaries and any proceeds arising from its investments in 
other companies. Therefore, KUE's ability to make any distributions to Investors will be completely 
dependent on the operations and business results of its subsidiaries and its investment holdings. 
KLC's ability to make distributions or payments to KUE is restricted by the provisions of its various debt 
agreements, including without limitation, the Indenture, dated as of February 2, 2005, by and between 
KLC, the Guarantors, as defined therein, and Wells Fargo Bank, N.A., as trustee. Therefore, KLC may be 
prevented from making distributions or payments to KUE as and when needed by KUE. Such restrictions 
may adversely affect the business and operations of KUE as a whole and the value of any investment in 
KUE. Similar restrictions may apply to future indebtedness incurred by KLC and other subsidiaries of 
KUE. 
6.4.5 There is no public market for, and Investors may be unable to sell, the Units 
There is no public trading market for the Units and one is not expected to develop. The economic risks of 
this investment must be borne for an indefinite period of time. Neither the Units nor the underlying 
Common LP Units or Class A Shares will be registered under the Securities Act or under any state 
securities laws (or the securities laws of any other jurisdiction). Each Investor will be required to 
represent that it is purchasing the Units for its own account for investment purposes and not with a view to 
resale or distribution. Although the General Partner intends to approve permitted transfers specified in 
the LPA, and not to unreasonably withhold consent to transfers, all transfers require the prior approval of 
the General Partner under Caymans Law, and no transfer of the Units may be made unless the transfer 
complies with the terms of the Limited Partnership Agreement. Although the Limited Partnership 
Agreement of KUE and the organizational documents of the General Partner permit the foregoing 
transfers and the General Partner has agreed with certain Investors to approve such transfers, applicable 
Cayman Islands law gives the General Partner full discretion to approve or disapprove transfers. 
Each transfer must be registered under the Securities Act and applicable state securities laws or an 
exemption must be available. These restrictions will be noted on a legend placed on each certificate, if 
any, representing the Units. As a precondition to the effectiveness of any transfer, the Company may 
require the transferor to provide an opinion of legal counsel stating that the transfer is in accordance with 
the Securities Act and to pay any costs the Company incurs in connection with the transfer. It is not 
currently contemplated that the Units will be registered under the Securities Act, the Exchange Act, or 
57 
other securities laws. In addition, certain provisions of Rule 144 under the Securities Act, which permit 
the resale, subject to various terms and conditions, of restricted securities after they have been held for 
one year, do not apply to the Units because the Company is not required to file and does not file, current 
reports under the Exchange Act and does not, and does not intend to, make comparable information 
publicly available. 
6.4.6 Purchasers of the Units are subject to Dilution 
Although we have not prepared a consolidated balance sheet for KUE, prior to this offering and the 
conversion of $180 million of KUE's preferred limited partner units currently held by the Principals and 
their affiliates into Common LP Units at the per Common LP Unit issuance price, we expect that KUE 
would have negative or nominally positive common equity book value due to its historical capital structure, 
including its level of indebtedness. As a result, the book value per Unit acquired in this offering will be 
substantially less after this offering than the purchase price paid by the Investors. The Investors interests 
are also subject to future dilution if and to the extent the Company grants options, profits interest units or 
similar rights to officers, directors or employees of the Company, and will also be affected by any awards 
by the Company under the Long Term Incentive Plan and the Stock Appreciation Rights Plan described 
under "Management Incentive Plans and Employment Agreements." Investors will have a Co-invest Right 
to purchase a pro-rata portion of certain issuances of Units by the Company for cash; however, such right 
is subject to customary exceptions. See "The Structure of KUE and the General Partner." 
6.4.7 KUE and the General Partner are not U.S. entities; disputes must be resolved by 
binding arbitration in the United Kingdom 
KUE will be a Cayman Islands exempted limited partnership. The General Partner is a Cayman Islands 
exempted company. The internal governance of KUE will be pursuant to the Limited Partnership 
Agreement in compliance with applicable laws of the Cayman Islands. The internal governance of the 
General Partner will be pursuant to the Memorandum and Articles of Association and the agreement 
among members in compliance with applicable laws of the Cayman Islands. All disputes under the 
applicable agreements or related to this offering must be resolved through binding arbitration conducted 
in the United Kingdom under the London Court of International Arbitration Rules. Such laws and Rules 
may offer less or different protections to Investors than laws applicable to comparable U.S. entities or 
laws of the Investors' home countries. 
6.4.8 The Company will not be operated to optimize the investment, tax or other 
objectives of any individual Investor 
The Investors may have conflicting investment, tax and other interests with respect to their investments in 
the Company. The conflicting interests of individual Investors may relate to or arise from, among other 
things, the nature of investments made by the Company and the structuring or the acquisition of 
investments. As a consequence, conflicts of interest may arise in connection with decisions made by the 
General Partner, including with respect to the nature or structuring of investments, that may be more 
beneficial for one Investor than for another Investor, especially with respect to Investors' individual tax 
situations. In selecting and structuring investments appropriate for the Company, the General Partner will 
consider the investment and tax objectives of the Company as a whole, not the investment, tax or other 
objectives of any individual Investor. Investors must seek their own investment, tax and other advice 
concerning an investment in the Units. 
6.4.9 The Investors may not separately transfer the constituent securities underlying 
the Units 
The Investors may not separately transfer Common LP Units or Class A Shares (unless otherwise 
approved by the Board of Directors of the General Partner and the Independent Committee), and there 
may be less Investor interest in a security such as the Units than there would be in more traditional 
58 
corporate or partnership investments. This restriction may adversely affect an Investors' ability to transfer 
the Units in the future. 
6.4.10 Under certain circumstances, the General Partner may cause an Investor's 
interest in KUE to be redeemed or transferred 
Under circumstances where the continuing participation in KUE by an Investor would have a material 
adverse effect on the Company, the General Partner may cause an Investor's interest in KUE to be 
redeemed or transferred. See "Limitation of a Limited Partner's Participation" in Section 4.11 of the 
Limited Partnership Agreement of KUE. 
59 
7. DISTRIBUTION POLICY 
We intend to retain any future earnings to fund working capital, debt service, acquisitions and growth and