Cayman Islands partnership structure for Knowledge Universe (KUE) with non‑transferable shares controlled by Principals

jiabilities other than in connection with its acting as general partner of KUE and as described in this Memorandum. The day to day business of the General Partner will be generally be conducted by its directors, although certain matters require the approval of its shareholders pursuant to the Companies Law and the General Partner's Articles of Association. Under Cayman Islands law, a director of a Cayman Islands company is obliged to comply with a number of duties, breach of which may, in certain circumstances, result in personal liability on the part of the director. However, provided a director complies with the fiduciary duties and the requisite duties of care, diligence and skill, the fact that a decision turns out to be wrong, not beneficial, or causes loss, will not of itself necessarily establish personal liability. As a general rule, in the absence of a contractual arrangement to the contrary, the liability of a shareholder of a Cayman Islands exempted company which has been incorporated with limited liability is limited to the amount from time to time unpaid in respect of the par value of, together with the share premium payable on, the shares he holds; the company having a separate legal personality from that of its shareholders, and being separately liable for its own debts due to third parties, However, although there is no decided Cayman Islands authority on the issue, English common law authority (which would be regarded as persuasive, though technically not binding, in the courts of the Cayman Islands), supports the proposition that it in exceptional circumstances it is conceivable that the principle of the separate legal personality of a company could be ignored and the court will “pierce the corporate veil.” Examples might be a company acting as the agent or nominee of its shareholder, incorporation for an illegal or improper purpose, using a company or group of companies as a means of perpetrating a fraud, or using the separate personality of a company to circumvent a pre-existing obligation of its proprietor. 14.3. Classes of Units; Capital Contributions Assuming that 1,000,000 Units are sold to Investors by March 31, 2007, and that the accrued dividends on the preferred limited partner units are paid in cash, approximately 2,530,000 Units will be outstanding. The Investors will own approximately 40% of KUE in the form of Common LP Units and approximately 40% of the General Partner in the form of Class A Shares. The General Partner will be the sole general partner of KUE and will hold approximately 1,000 General Partner Units (“GP Units’) in KUE, representing approximately 0.04% ownership in KUE. The economic interest in KUE represenied by the Common LP Units and the GP Units will be reduced by the Profits Participation LP Units as described below under "Distributions." Assuming that 1,000,000 Units are sold to Investors by March 31, 2007, and that the accrued dividends on the preferred limited partner units are paid in cash, KUE LLC, controlled by the Principals, will hold approximately 1,530,000 Common LP Units representing approximately 60% ownership in KUE and 1,530,000 Class A Shares. The Common LP Units owned by KUE LLC will not be transferable, except (i) to the Principals; (ii) to affiliates of the Principals and/or (iii) to family members and/or charitable organizations in connection with the Principals’ estate planning, unless combined with the corresponding percentage of Class A Shares to form Units and transferred in the form of Units in accordance with the Limited Partnership Agreement. Knowledge Universe Holdings LLC, a Delaware limited liability company (“KUH LLC”) conirolled by the Principals, will hold 900 Class B ordinary shares of the General Partner (the “Class B Shares"). The Class B Shares held by the Principals and their affiliates will not be transferable, except to (i) the Principals; {ii) to the affiliates of the Principals; and/or (iii) to family members and/or charitable organizations in connection with the Principals’ estate planning. 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 outstanding Partnership Units (as defined below) of KUE. A limited liability company ("KULG LLC-1"), of which Knowledge Universe Learning Group LLC, a Delaware limited liability company that is controlled by the Principals ("KULG”), and certain other persons 116 HOUSE_OVERSIGHT_024549