Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IGgRQNGXQhL24eg4VLA6bCIRqBHH/IjpKc2rv+PmDgXKoB8xUWDTNyCtjAaUgSdi lbg8DQGFBLL1fjMCRZJG8w== 0000950123-11-009261.txt : 20110204 0000950123-11-009261.hdr.sgml : 20110204 20110204163055 ACCESSION NUMBER: 0000950123-11-009261 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20110204 DATE AS OF CHANGE: 20110204 GROUP MEMBERS: CORNERSTONE FINANCIAL GROUP LLC GROUP MEMBERS: HAMPSTEAD ASSOCIATES, L.L.C. GROUP MEMBERS: KCDL HOLDINGS LLC GROUP MEMBERS: KNOWLEDGE INDUSTRIES LLC GROUP MEMBERS: KNOWLEDGE UNIVERSE LEARNING GROUP LLC GROUP MEMBERS: KNOWLEDGE UNIVERSE LLC GROUP MEMBERS: LEARNING GROUP LLC GROUP MEMBERS: LEARNING GROUP PARTNERS GROUP MEMBERS: LOWELL J. MILKEN GROUP MEMBERS: MICHAEL R. MILKEN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: K12 INC CENTRAL INDEX KEY: 0001157408 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 954774688 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-83717 FILM NUMBER: 11575144 BUSINESS ADDRESS: STREET 1: 2300 CORPORATE PARK DRIVE STREET 2: SUITE 200 CITY: HERNDON STATE: VA ZIP: 20171 BUSINESS PHONE: 7034837000 MAIL ADDRESS: STREET 1: 2300 CORPORATE PARK DRIVE STREET 2: SUITE 200 CITY: HERNDON STATE: VA ZIP: 20171 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEARNING GROUP LLC CENTRAL INDEX KEY: 0001420400 IRS NUMBER: 954862530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 1250 FOURTH STREET, SUITE 550 CITY: SANTA MONICA STATE: CA ZIP: 90401 BUSINESS PHONE: 310-570-4900 MAIL ADDRESS: STREET 1: 1250 FOURTH STREET, SUITE 550 CITY: SANTA MONICA STATE: CA ZIP: 90401 SC 13D 1 c11883sc13d.htm SCHEDULE 13D Schedule 13D

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. )*

K12 Inc.

(Name of Issuer)

Common Stock, Par Value $0.0001 Per Share

(Title of Class of Securities)

48273U 102

(CUSIP Number)

Scott R. Haber
Latham & Watkins LLP
505 Montgomery Street, Suite 2000
San Francisco, CA 94111
(415) 391-0600

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

January 27, 2011

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Learning Group LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

4,665,083 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

4,665,083 shares

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

4,665,083 shares

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

15.0%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010. See Item 5 of this Schedule 13D.

Page 2 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Learning Group Partners

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

California

SOLE VOTING POWER

NUMBER OF

399,171 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

399,171 shares

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

399,171 shares

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

1.3%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010. See Item 5 of this Schedule 13D.

Page 3 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Hampstead Associates, L.L.C.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

1,522 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

1,522 shares

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

1,522 shares

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

Less than 0.1%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010. See Item 5 of this Schedule 13D.

Page 4 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Cornerstone Financial Group LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

AF, WC

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

California

SOLE VOTING POWER

NUMBER OF

0 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

0 shares

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

0 shares

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

Page 5 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Knowledge Industries LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

California

SOLE VOTING POWER

NUMBER OF

0 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

0 shares

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

0 shares

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

Page 6 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Knowledge Universe Learning Group LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

4,374 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

7,415,083 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

4,374 shares

WITH

SHARED DISPOSITIVE POWER

7,415,083 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

7,419,457 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

21.9%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010, assuming the conversion of the Special Stock into shares of Common Stock. See Item 5 of this Schedule 13D.

Page 7 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Knowledge Universe LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

California

SOLE VOTING POWER

NUMBER OF

0 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

1,522 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

0 shares

WITH

SHARED DISPOSITIVE POWER

1,522 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

1,522 shares

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

Less than 0.1%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010. See Item 5 of this Schedule 13D.

Page 8 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

KCDL Holdings LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

2,750,000 shares (Common Stock issuable upon conversion of Series A Special Stock)

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

2,750,000 shares (Common Stock issuable upon conversion of Series A Special Stock)

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

2,750,000 shares (Common Stock issuable upon conversion of Series A Special Stock)

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

8.1%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010, assuming the conversion of the Special Stock into shares of Common Stock. See Item 5 of this Schedule 13D.

Page 9 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Lowell J. Milken

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

AF, PF

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

USA

SOLE VOTING POWER

NUMBER OF

61,895 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

7,820,150 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

61,895 shares

WITH

SHARED DISPOSITIVE POWER

7,820,150 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

7,882,045 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

23.3%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010, assuming the conversion of the Special Stock into shares of Common Stock. See Item 5 of this Schedule 13D.

Page 10 of 20


CUSIP No.		48273U 102

NAMES OF REPORTING PERSONS

Michael R. Milken

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) þ

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

USA

SOLE VOTING POWER

NUMBER OF

0 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

7,820,150 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

0 shares

WITH

SHARED DISPOSITIVE POWER

7,820,150 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

7,820,150 shares (includes 2,750,000 shares of Common Stock issuable upon conversion of Series A Special Stock)

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

23.1%*

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Percentage ownership based on shares of Common Stock outstanding as of December 20, 2010, assuming the conversion of the Special Stock into shares of Common Stock. See Item 5 of this Schedule 13D.

Page 11 of 20

The Reporting Persons (other than KCDL (as defined below)) have previously filed statements on Schedule 13G related to the common stock, par value $0.0001 per share (the “Common Stock”), of K12 Inc., a Delaware corporation (the “Company”). The Reporting Persons are filing this Schedule 13D as a result of the acquisition of beneficial ownership of shares of Common Stock by KCDL described herein, and will continue to report on Schedule 13D unless and until the Reporting Persons become eligible to report on Schedule 13G in the future. This Schedule 13D supersedes the previously filed statements on Schedule 13G and constitutes Amendment No. 3 to the Schedule 13G.


Item 1.		Security and Issuer

This Schedule 13D relates to the Common Stock of the Company. The address of the principal executive office of the Company is 2300 Corporate Park Drive, Herndon, Virginia 20171.


Item 2.		Identity and Background

This Schedule 13D is being filed by Learning Group LLC, a Delaware limited liability company (“Learning Group”), Learning Group Partners, a California general partnership (“Learning Group Partners”), Hampstead Associates, L.L.C., a Delaware limited liability company (“Hampstead”), Cornerstone Financial Group LLC, a California limited liability company (“Cornerstone”), Knowledge Industries LLC, a California limited liability company (“Knowledge Industries”), Knowledge Universe Learning Group LLC, a Delaware limited liability company (“KULG”), Knowledge Universe LLC, a California limited liability company (formerly known as Ridgeview Associates, LLC) (“KU”), KCDL Holdings LLC, a Delaware limited liability company (“KCDL”), Lowell J. Milken and Michael R. Milken.

Learning Group, Learning Group Partners, Hampstead, Cornerstone, Knowledge Industries, KULG, KU, KCDL, Lowell J. Milken and Michael R. Milken are collectively referred to herein as the “Reporting Persons.” The agreement among the Reporting Persons relating to the joint filing of this statement is attached as Exhibit 1 hereto. The address of the principal office of Reporting Persons is 1250 Fourth Street, Santa Monica, California 90401.

The principal business of Learning Group, Learning Group Partners, Knowledge Industries, KULG, Cornerstone and Hampstead is to acquire interests in, directly or indirectly, and/or operate other companies and businesses primarily, but not limited to, companies and businesses engaged in education. The principal business of KU is to act as the manager and as a member of Hampstead. The principal business of KCDL is to hold the Special Stock (as defined below). The principal activities of Michael R. Milken are philanthropy and to serve as a director and officer of KUE Management Inc., the general partner of Knowledge Universe Education L.P. (“KUE”). The principal activities of Lowell J. Milken are philanthropy and to serve as a director and officer of Knowledge Universe Limited LLC and KUE-related entities. The principal activity of KUE is to engage in for-profit activities involving the education field, including through its ownership of Learning Group and KCDL. The address of the principal office of KUE Management Inc. and KUE is 1250 Fourth Street, Santa Monica, California 90401. Lowell J. Milken and Michael R. Milken are United States citizens.

Page 12 of 20

The name, citizenship, business address, present principal occupation or employment and, if applicable, the name, principal business and address of any corporation or other organization in which such employment is conducted, of the executive officers, if any, managers, if any, and directors, if any, of the Reporting Persons are set forth in Appendix I hereto, which is incorporated herein by reference.

During the last five years, none of the Reporting Persons or, to the best knowledge of the Reporting Persons, any of the individuals named in Appendix I, has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors), or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding is or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws.


Item 3.		Source and Amount of Funds or Other Consideration.

The shares of Common Stock held by the Reporting Persons are held of record by Learning Group, Learning Group Partners, Hampstead, KULG and Mr. Lowell J. Milken, respectively. The shares of Special Stock held by the Reporting Persons are held of record by KCDL. Cornerstone and Knowledge Industries previously held shares of Common Stock but as of the date hereof do not hold, directly or indirectly, any shares of Common Stock.

The amount of funds used to purchase the shares of Common Stock held directly by Learning Group was approximately $25,151,800. The source of the funds was working capital.

The shares of Common Stock held directly by Learning Group Partners were acquired through an affiliate of Learning Group Partners for approximately $2,278,200 and subsequently transferred to Learning Group Partners. The source of the funds was working capital of the affiliate.

The shares of Common Stock held directly by Hampstead were acquired through an affiliate of Hampstead for approximately $7,800 and subsequently transferred to Hampstead. The source of the funds was working capital of the affiliate.

Of the shares previously held by Cornerstone, 1,371 shares of Common Stock were acquired upon cashless exercise of a warrant issued to Cornerstone in connection with debt financing provided by Cornerstone to the Company in 2003, and 82,503 shares of Common Stock were acquired upon cashless exercise of a warrant which was originally issued to an affiliate of Cornerstone that provided debt financing to the Company in 2001 and which was subsequently transferred to Cornerstone. The sources of the respective debt financings were working capital of Cornerstone and working capital of such affiliate.

The shares of Common Stock previously held by Knowledge Industries were acquired upon cashless exercise of a warrant. The warrant was originally issued to an affiliate of Knowledge Industries that provided debt financing to the Company in 2001 and was subsequently transferred to Knowledge Industries. The source of the debt financing was working capital of the affiliate.

Page 13 of 20

The shares of Common Stock held directly by KULG were acquired upon cashless exercise of a warrant. The warrant was originally issued to an affiliate of KULG that provided debt financing to the Company in 2003 and was subsequently transferred to KULG. The source of the debt financing was working capital of the affiliate.

Of the shares held directly by Mr. Lowell J. Milken, 20,000 shares of Common Stock were acquired in August 2008 upon exercise of stock options that he was granted as a director of the Company for approximately $141,600. The source of the funds was personal funds. Mr. Lowell J. Milken directly acquired 41,895 shares of Common Stock in February 2011 upon a pro rata distribution by Cornerstone of its shares of the Company to its members.

The shares of Series A Special Stock, par value $0.0001 per share (the “Special Stock”), held by KCDL were acquired pursuant to an Agreement and Plan of Merger, dated as of July 23, 2010 (the “Merger Agreement”), among the Company, Kayleigh Sub Two LLC (“LLC Merger Sub”), Kayleigh Sub One Corp. (“Corporate Merger Sub”), KCDL and KC Distance Learning, Inc. (“KC Distance”), pursuant to which the Company acquired by merger of all of the equity interests of KC Distance from KCDL. As consideration for the acquisition, the Company issued a total of 2,750,000 shares of Special Stock to KCDL. As of July 23, 2010, the estimated value of the consideration exchanged for the Special Stock was $63,112,500. The Merger Agreement is attached as Exhibit 2 hereto and incorporated by reference herein.


Item 4.		Purpose of the Transaction

The Common Stock and Special Stock held by the Reporting Persons was acquired for investment purposes. The Reporting Persons intend to review continuously their equity position in the Company and, subject to the Stockholders Agreement and depending upon price and availability, subsequent developments affecting the Company, the Company’s business and prospects, other investment and business opportunities available to the Reporting Persons, general stock market and economic conditions, tax considerations and other factors deemed relevant, the Reporting Persons may decide to increase, decrease or maintain the size of their investment in the Company.

Although the foregoing reflects activities presently contemplated by the Reporting Persons and any other person named in Item 2, above, with respect to the Company, the foregoing is subject to change at any time. Except as set forth above, the Reporting Persons have no present plans or intentions which would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.


Item 5.		Interest in Securities of the Issuer.

The Reporting Persons beneficially own an aggregate of 7,882,045 shares of Common Stock, including 5,132,045 shares of Common Stock and 2,750,000 shares of Special Stock which is convertible into 2,750,000 shares of Common Stock. The shares of Common Stock and Special Stock beneficially owned by Reporting Persons represent, in the aggregate, approximately 23.3% of the outstanding Common Stock, assuming the conversion of the Special Stock into shares of Common Stock. The percentages of beneficial ownership in this Schedule 13D are based on an aggregate of 31,102,258 shares of Common Stock outstanding as of December 20, 2010. Unless otherwise stated, the percentage ownership amounts stated herein are based on the outstanding Common Stock and do not assume the conversion of the Special Stock into shares of Common Stock.

Page 14 of 20

Learning Group holds directly 4,665,083 shares of Common Stock, representing approximately 15.0% of the outstanding Common Stock.

KULG holds directly 4,374 shares of Common Stock, representing less than 0.1% of the outstanding Common Stock. KULG also may be deemed to be a controlling person of Learning Group and KCDL, and in such capacity may be deemed to have the power to direct the voting and disposition of, and to share beneficial ownership of, the securities owned of record by Learning Group and KCDL. The shares of Common Stock that KULG may be deemed to hold directly and indirectly represent approximately 21.9% of the outstanding Common Stock, assuming the conversion of the Special Stock into shares of Common Stock

Learning Group Partners holds directly 399,171 shares of Common Stock, representing approximately 1.3% of the outstanding Common Stock.

Hampstead holds directly 1,522 shares of Common Stock, representing less than 0.1% of the outstanding Common Stock. KU is the manager and a member of Hampstead, and in such capacities may be deemed to have the power to direct the voting and disposition of, and to share beneficial ownership of, the 1,522 shares of Common Stock owned of record by Hampstead, representing less than 0.1% of the outstanding Common Stock.

As of December 31, 2010, Cornerstone held directly 83,874 shares of Common Stock, representing approximately 0.3% of the outstanding Common Stock. On February 2, 2011, Cornerstone made a pro rata distribution of 83,874 shares of Common Stock to its members, including 41,895 shares of Common Stock to Lowell J. Milken and the remaining shares of Common Stock to other individuals who are not Reporting Persons, and ceased to be a Reporting Person. As of the date hereof, Cornerstone does not hold, directly or indirectly, any shares of Common Stock.

On December 31, 2010, Knowledge Industries made a gift to a non-profit foundation of the 82,503 shares of Common Stock it held directly, representing approximately 0.3% of the outstanding Common Stock, and ceased to be a Reporting Person. As of the date hereof, Knowledge Industries does not hold, directly or indirectly, any shares of Common Stock.

KCDL holds directly 2,750,000 shares of Special Stock which are convertible into 2,750,000 shares of Common Stock, representing approximately 8.1% of the outstanding Common Stock, assuming the conversion of the Special Stock into shares of Common Stock. The shares of Special Stock were issued on July 23, 2010. At a special meeting of stockholders of the Company held on January 27, 2011, the holders of a majority of the outstanding shares of Common Stock approved the voting rights and rights of conversion of the Special Stock, and from and after such approval the Special Stock has been and is entitled to vote on all matters presented to the holders of Common Stock (other than for the election and removal of directors, on which the holders of Special Stock have no vote) and the Special Stock is convertible into an equal number of shares of Common Stock.

Lowell J. Milken directly holds 61,895 shares of Common Stock, representing approximately 0.2% of the outstanding Common Stock. Lowell J. Milken may be deemed to be a controlling person of each of Learning Group, KULG, Learning Group Partners, Hampstead, KU, Cornerstone and KCDL and in such capacity may be deemed to have the power to direct the voting and disposition of, and to share beneficial ownership of, an aggregate of 7,820,150 shares of Common Stock beneficially owned by such entities, but disclaims such beneficial ownership. The shares of Common Stock which Lowell J. Milken owns directly and which he may be deemed to own indirectly represent approximately 23.3% of the outstanding Common Stock, assuming the conversion of the Special Stock into shares of Common Stock.

Page 15 of 20

Michael R. Milken may be deemed to be a controlling person of each of Learning Group, KULG, Learning Group Partners, Hampstead, KU, Knowledge Industries and KCDL, and in such capacity may be deemed to have the power to direct the voting and disposition of, and to share beneficial ownership of, an aggregate of any 7,820,150 shares of Common Stock beneficially owned by such entities (which represent approximately 23.1% of the outstanding shares of Common Stock, assuming the conversion of the Special Stock into shares of Common Stock), but disclaims such beneficial ownership.

The persons named in Item 5 of this Schedule 13D may be deemed to be a group with respect to the securities of the Company which they hold directly or indirectly. Such persons disclaim such group membership.

Except as described herein, none of the Reporting Persons or any other person named in Item 2, above, has effected any transactions in the Shares in the past 60 days. Except as described in this Item 5, no person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares covered by this Schedule 13D.


Item 6.		Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

On July 23, 2010, the Company entered into the Merger Agreement. Pursuant to the terms of the Merger Agreement, (i) KC Distance merged with Corporate Merger Sub, with KC Distance continuing as the surviving corporation of the merger (the “First Merger”), and (ii) immediately after the First Merger, KC Distance (as the surviving corporation of the First Merger) merged with LLC Merger Sub, with LLC Merger Sub continuing as the surviving entity of the merger (the “Second Merger” and together with the First Merger, the “Mergers”). The Mergers were consummated on July 23, 2010 following the execution of the Merger Agreement. As a result of the Mergers, the surviving entity of the Second Merger is now a wholly-owned subsidiary of the Company. As consideration in the First Merger, the Company issued a total of 2,750,000 shares of Special Stock to KCDL. The shares of Special Stock have the terms described below. The Merger Agreement includes a customary adjustment for the net working capital and closing debt of KC Distance as of the closing of the Mergers.

The Company designated the Special Stock in a Certificate of Designations, Preferences and Relative and Other Special Rights of Series A Special Stock (the “Series A Certificate of Designations”). The Series A Certificate of Designations was filed with the Secretary of State of the State of Delaware and became effective on July 23, 2010. At a special meeting of stockholders of the Company held on January 27, 2011, the holders of the outstanding shares of Common Stock approved the voting rights and rights of conversion of the Special Stock, and from and after such approval the Special Stock has been and is entitled to vote on all matters presented to the holders of Common Stock (other than for the election and removal of directors, on which the holders of Special Stock have no vote) and the Special Stock is convertible into an equal number of shares of Common Stock, subject to anti-dilution adjustments, at the election of the holder or automatically upon (i) a transfer of the shares of

Page 16 of 20

Special Stock to any person or entity other than KCDL or an affiliate of KCDL who has signed a joinder to the Stockholders Agreement or (ii) at the close of business on the date, if any, as such holder of the Special Stock has received all consents and approvals required under (A) applicable non-competition, restraint of trade or pre-acquisition notification laws, (B) control share and other anti-takeover laws, and (C) the Delaware General Corporation Law, for such holder to acquire and own all of the shares of Common Stock issuable upon such conversion of all shares of Special Stock held by such holder.

Concurrently with the execution of the Merger Agreement, the Company, LLC Merger Sub, Corporate Merger Sub, Learning Group, Learning Group Partners, Knowledge Industries and Cornerstone entered into a Voting Agreement dated as of July 23, 2010 (the “Voting Agreement”). Pursuant to the terms of the Voting Agreement, Learning Group, Learning Group Partners, Knowledge Industries and Cornerstone agreed to vote in favor of the approval of voting and conversion rights of the Special Stock by the Company’s stockholders.

Concurrently with the execution of the Merger Agreement, KCDL, Learning Group, Learning Group Partners, Knowledge Industries, Cornerstone and the Company entered into a Stockholders Agreement dated as of July 23, 2010 (the “Stockholders Agreement”). Pursuant to the Stockholders Agreement, KCDL, Learning Group, Learning Group Partners, Knowledge Industries and Cornerstone agreed to a standstill limitation regarding actions related to the acquisition of shares of voting securities of the Company for a term of one year. In addition, pursuant to the Stockholders Agreement, KCDL, Learning Group, Learning Group Partners, Knowledge Industries and Cornerstone agreed to transfer restrictions on their shares of stock of the Company (including the Special Stock) for a term of up to one year from the date of the closing of the Mergers, and the Company granted KCDL, Learning Group, Learning Group Partners, Knowledge Industries and Cornerstone demand registration rights related to the shares acquired in the Mergers.

Concurrently with the execution of the Merger Agreement, Learning Group gave a limited guarantee (the “Limited Guarantee”) in favor of the Company and KC Distance Learning. Pursuant to the Limited Guarantee, Learning Group guaranteed to the Company and KC Distance Learning the payment, performance and discharge of certain contingent obligations of KCDL under the Merger Agreement.

Concurrently with the execution of the Merger Agreement, the Company, KCDL, KC Distance Learning and KUE, an affiliate of KCDL, entered into a Non-Competition and Non-Solicitation Agreement dated as of July 23, 2010 (the “Non-Competition and Non-Solicitation Agreement”), pursuant to which KUE agreed that, until July 23, 2013, neither it nor its direct and indirect controlled subsidiaries, including KCDL and Learning Group, would (i) operate, own or manage any business which directly competes with the business of KC Distance Learning, except ownership, operation or management of certain permitted investments, and (ii) directly or indirectly recruit or solicit for employment, hire or employ, or induce or attempt to induce any termination of employment or hiring of certain specified protected employees, including employees of KC Distance Learning.

The Merger Agreement, Series A Certificate of Designations, Voting Agreement, Stockholders Agreement, Limited Guarantee and Non-Competition and Non-Solicitation Agreement are attached as Exhibit 2, Exhibit 3, Exhibit 4, Exhibit 5, Exhibit 6 and Exhibit 7, respectively, to this Schedule 13D. The summary descriptions of the Merger Agreement, Series A Certificate of Designations, Voting Agreement, Stockholders Agreement, Limited Guarantee and Non-Competition and Non-Solicitation Agreement in this Schedule 13D do not purport to be complete and are qualified in their entirety by reference to each such agreement or instrument, each of which is incorporated herein by reference.

Page 17 of 20


Item 7.		Material Exhibits to be Filed.


Exhibit 1:		Joint Filing Agreement dated as of February 4, 2011

Exhibit 2:		Merger Agreement by and among the Company, LLC Merger Sub, Corporate Merger Sub, KCDL and KC Distance Learning (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 3:		Series A Certificate of Designations (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 4:		Voting Agreement dated as of July 23, 2010 among the Company, KCDL, Learning Group, Learning Group Partners, Knowledge Industries, Cornerstone and the other parties thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 5:		Stockholders Agreement dated as of July 23, 2010 among the Company, KCDL, Learning Group, Learning Group Partners, Knowledge Industries and Cornerstone (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 6:		Limited Guarantee dated as of July 23, 2010 among the Company, KC Distance Learning and KCDL

Exhibit 7:		Non-Competition and Non-Solicitation Agreement dated as of July 23, 2010 among the Company, KCDL, KC Distance Learning and KUE

[Signature Page Follows]

Page 18 of 20

SIGNATURES

After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this Statement is true, complete and correct.


Dated: February 4, 2011	Learning Group LLC, a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Learning Group Partners, a California general partnership
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Hampstead Associates, L.L.C., a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Cornerstone Financial Group LLC, a California limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Knowledge Industries LLC, a California limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Knowledge Universe Learning Group LLC, a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Page 19 of 20


Dated: February 4, 2011	Knowledge Universe LLC, a California limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	KCDL Holdings LLC, a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Manager


Dated: February 4, 2011	/s/ Lowell J. Milken
	Lowell J. Milken,
	an individual


Dated: February 4, 2011	/s/ Michael R. Milken
	Michael R. Milken,
	an individual

Page 20 of 20

APPENDIX I

The following are the names, principal occupation or employment and, if applicable, the name, principal business and address of any corporation or other organization in which such employment is conducted, of the individual directors, executive officers and managers, if any, of each of the Reporting Persons. Each individual listed below is a United States citizen.

The Managers of Learning Group LLC are Michael R. Milken and Lowell J. Milken.

The Managing Partners of Learning Group Partners are Michael R. Milken and Lowell J. Milken.

The Manager of Cornerstone Financial Group LLC is Stanley E. Maron. Mr. Maron’s principal occupation is a partner in the law firm of Maron & Sandler, P.C. The business address of Mr. Maron and the address of Maron & Sandler, P.C. is 1250 Fourth Street, Suite 550, Santa Monica, California 90401.

The Manager of Knowledge Industries LLC is Ralph Finerman. Mr. Finerman’s principal occupation is President of RFG Financial Group Inc., which is a financial consulting firm. The business address of Mr. Finerman and the address of RFG Financial Group is 1250 Fourth Street, Suite 580, Santa Monica, California 90401.

The Directors of Knowledge Universe Learning Group LLC are Steven J. Green, Jeffrey M. Safchik, Mr. Finerman, Mr. Maron and Michael R. Milken, who also serves as President. Mr. Green’s principal occupation is an investor and his business address is 2601 South Bayshore Drive, Suite 800, Coconut Grove, Florida 33133. Mr. Safchik’s principal occupation is Managing Director and Chief Financial Officer of Greenstreet Partners, L.P., the principal business of which is investment and management. The business address of Mr. Safchik and the address of Greestreet Partners, L.P. is 2601 South Bayshore Drive, Suite 800, Coconut Grove, Florida 33133.

The Managers of Knowledge Universe LLC are Michael R. Milken and Lowell J. Milken.

The Manager of KCDL Holdings LLC is Stanley E. Maron.

EXHIBIT INDEX


Exhibit 1:		Joint Filing Agreement dated as of February 4, 2011

Exhibit 2:		Merger Agreement by and among the Company, LLC Merger Sub, Corporate Merger Sub, KCDL and KC Distance Learning (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 3:		Series A Certificate of Designations (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 4:		Voting Agreement dated as of July 23, 2010 among the Company, KCDL, Learning Group, Learning Group Partners, Knowledge Industries, Cornerstone and the other parties thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 5:		Stockholders Agreement dated as of July 23, 2010 among the Company, KCDL, Learning Group, Learning Group Partners, Knowledge Industries and Cornerstone (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on July 26, 2010)

Exhibit 6:		Limited Guarantee dated as of July 23, 2010 among the Company, KC Distance Learning and KCDL

Exhibit 7:		Non-Competition and Non-Solicitation Agreement dated as of July 23, 2010 among the Company, KCDL, KC Distance Learning and KUE

EX-99.1 2 c11883exv99w1.htm EXHIBIT 1 Exhibit 1

Exhibit 1

JOINT FILING AGREEMENT

The undersigned acknowledge and agree that the foregoing Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint acquisition statements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the other, except to the extent that it knows or has reason to believe that such information is inaccurate.


Dated: February 4, 2011	Learning Group LLC, a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Learning Group Partners, a California general partnership
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Hampstead Associates, L.L.C., a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Cornerstone Financial Group LLC, a California limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Knowledge Industries LLC, a California limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary


Dated: February 4, 2011	Knowledge Universe Learning Group LLC, a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	Knowledge Universe LLC, a California limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Secretary

Dated: February 4, 2011	KCDL Holdings LLC, a Delaware limited liability company
	/s/ Stanley E. Maron
	By: Stanley E. Maron,
	Its: Manager

Dated: February 4, 2011


	/s/ Lowell J. Milken
	Lowell J. Milken,
	an individual

Dated: February 4, 2011


	/s/ Michael R. Milken
	Michael R. Milken,
	an individual

EX-99.6 3 c11883exv99w6.htm EXHIBIT 6 Exhibit 6

Exhibit 6

Execution Version

LIMITED GUARANTEE
OF
LEARNING GROUP LLC

This Limited Guarantee, dated as of July 23, 2010 (this “Limited Guarantee”), by Learning Group LLC, a Delaware limited liability company (the “Guarantor”), in favor of K12 Inc., a Delaware corporation (“Parent”), and KC Distance Learning, Inc., a Delaware corporation (the “Company”). Reference is hereby made to the Agreement and Plan of Merger (the “Merger Agreement”) of even date herewith by and among Parent, Kayleigh Sub Two LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent, Kayleigh Sub One Corp., a Delaware corporation and a wholly owned subsidiary of Parent, KCDL Holdings LLC, a Delaware limited liability company and an affiliate of Guarantor (“Seller”), and the Company. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement. Each of Guarantor, Parent and the Company may be referred to herein as a “Party” and collectively are referred to herein as the “Parties.”

1. Limited Guarantee.

(a) To induce Parent to enter into the Merger Agreement, the Guarantor absolutely, unconditionally and irrevocably guarantees to Parent and the Company (on behalf of themselves and any other Parent Indemnified Party) the due and punctual payment, performance and discharge of the obligations of Seller under Section 7.02(a)(v) of the Merger Agreement to indemnify the Parent Indemnified Parties from the Losses specified therein, subject to the limitations and conditions on such indemnification set forth in the Merger Agreement (the “Guaranteed Obligations”). The Parties hereto acknowledge and agree that the maximum aggregate liability of the Guarantor in respect of the Guaranteed Obligations (the “Maximum Amount”) shall not exceed (x) the Merger Consideration Cap, less (y) any Losses otherwise paid or payable to the Parent Indemnified Parties and/or their respective Affiliates by Seller or any of its Affiliates under the Merger Agreement, the Transition Services Agreement and the Non-Competition Agreement, and less (z) all or any portion of the Guaranteed Obligations of which Seller is relieved by the satisfaction thereof or pursuant to any agreement with Parent.

(b) All payments hereunder shall be made in accordance with the provisions of Section 7.04 of the Merger Agreement, mutatis mutandis, as applicable to shares of Parent Special Stock or shares of the Parent Common Stock held by Guarantor.

2. Nature of Limited Guarantee.

(a) This Limited Guarantee is a guarantee of payment and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Limited Guarantee up to the Maximum Amount, but only from and after such time as Seller has breached or failed to perform any of the Guaranteed Obligations.

(b) Neither Parent nor the Company shall be obligated to file any claim relating to the Guaranteed Obligations in the event that Seller becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Parent or the Company to so file shall not affect the Guaranteed Obligations hereunder.

(c) In the event that any payment to Parent or the Company in respect of any Guaranteed Obligations is rescinded or must otherwise be returned, the Guarantor shall remain liable hereunder with respect to such Guaranteed Obligations as if such payment had not been made.

(d) The Guarantor reserves the right to assert defenses which Seller may have to payment of any Guaranteed Obligations that arise under the terms of the Merger Agreement.

3. Changes in Guaranteed Obligations; Certain Waivers.

(a) Guarantor agrees that the Parent or the Company may at any time and from time to time, without notice to or further consent of Guarantor, extend the time of payment of any of the Guaranteed Obligations, and may also make any agreement with Seller for the extension, renewal, payment, compromise, discharge or release thereof, in whole or in part, or for any modification of the terms thereof or of any agreement between the Parent and Seller or any such other Person without in any way impairing or affecting this Limited Guarantee.

(b) Guarantor agrees that the Guaranteed Obligations shall not be released or discharged, in whole or in part, or otherwise affected by (i) any change in the time, place or manner of payment of any of the Guaranteed Obligations or any rescission, waiver, compromise, consolidation or other amendment or modification of any of the terms or provisions of the Merger Agreement or any other agreement evidencing, securing or otherwise executed in connection with any of the Guaranteed Obligations, (ii) any change in the corporate existence, structure or ownership of Seller; (iii) any insolvency, bankruptcy, reorganization, or other similar proceeding affecting Seller; (iv) the existence of any claim, set-off or other rights which Guarantor may have at any time against Parent or its Affiliates, whether in connection with the Guaranteed Obligations or otherwise; or (v) the adequacy of any other means the Parent may have of obtaining payment of the Guaranteed Obligations.

(c) To the fullest extent permitted by Law, Guarantor hereby expressly waives any and all rights or defenses arising by reason of any Law which would otherwise require any election of remedies by the Parent. Guarantor waives promptness, diligence, notice of the acceptance of this Limited Guarantee and of the Guaranteed Obligations, presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of any Guaranteed Obligations incurred and all other notices of any kind (except for notices to be provided to Seller in accordance with the Merger Agreement), all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Seller or any other entity or other person liable with respect to any of the Guaranteed Obligations, and all suretyship defenses generally, in each case, other than (i) fraud or willful misconduct by the Parent or any of its Subsidiaries (but not including the Company with respect to actions or omission prior to the date hereof) related to the subject matter hereof, (ii) defenses to the payment of the Guaranteed Obligations that are available to Seller under the Merger Agreement, or (iii) the absence of a breach or failure to perform by Seller of the Guaranteed Obligations.

(d) Guarantor acknowledges that it will receive substantial benefits from the transactions contemplated by the Merger Agreement and that the waivers set forth in this Limited Guarantee are knowingly made in contemplation of such benefits.

4. No Waiver, Cumulative Rights. No failure on the part of the Parent or the Company to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Parent or the Company of any right, remedy or power hereunder preclude any other or future exercise of any right, remedy or power hereunder. Each and every right, remedy and power hereby granted to the Parent or the Company or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Parent or the Company at any time or from time to time.

5. Representations and Warranties. Guarantor hereby represents and warrants that:

(a) this Limited Guarantee has been duly authorized, executed and delivered by Guarantor and constitutes the valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar law affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(b) the execution, delivery and performance by Guarantor of this Limited Guarantee will not, with or without the giving of notice or lapse of time, or both, (i) violate any provision of law to which Guarantor is subject, (ii) violate any order, judgment or decree applicable to Guarantor or (iii) conflict with, or result in a breach or default under, any term or condition of any agreement or other instrument to which Guarantor is a party or by which Guarantor or its assets or properties is bound; and

6. No Assignment. No Party may assign its rights, interests or Guaranteed Obligations hereunder to any other person (except by operation of law) without the prior written consent of the other Parties hereto, as the case may be; provided, however, that Guarantor may assign all or a portion of its Guaranteed Obligations hereunder to an affiliate or to an entity managed or advised by an affiliate of Guarantor, provided that no such assignment shall relieve Guarantor of any liability or obligation hereunder except to the extent actually performed or satisfied by the assignee or agreed to in writing by Parent.

7. Notices. All notices, requests, demands, claims and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by facsimile (with written confirmation of transmission); the Business Day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and five Business Days after the date mailed by certified or registered mail, postage prepaid, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to:

Notices to Parent or the Company, to:

K12 Inc.
2300 Corporate Park Drive
Herndon, Virginia 20171
Attn: General Counsel
Fax: (703) 483-7496

with a copy, which shall not constitute notice, to:

Kirkland & Ellis LLP
601 Lexington Avenue
New York, New York 10022
Attn: David Fox
William B. Sorabella
Fax: (212) 446-6460

Notices to Guarantor, to:

Learning Group LLC
c/o Maron & Sandler
1250 Fourth Street, Suite 550
Santa Monica, California 90401
Attn: Stanley E. Maron
Fax: (310) 570-4901

with a copy, which shall not constitute notice, to:

Latham & Watkins LLP
355 South Grand Ave.
Los Angeles, California 90071
Attn: Thomas C. Sadler
Fax: (213) 891-8763

Any Party may change the address to which notices, requests, demands, claims, and other communications required or permitted hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

8. Continuing Guarantee; Termination.

(a) This Limited Guarantee shall remain in full force and effect and shall be binding on Guarantor, its successors and assigns until the Guaranteed Obligations are satisfied in full or any claim may be made by Parent or the Company (for themselves or on behalf of any Parent Indemnified Party) for payment of any of the Guaranteed Obligations. Notwithstanding the foregoing, this Limited Guarantee shall terminate and Guarantor shall have no further Guaranteed Obligations under this Limited Guarantee as of the earlier of (i) thirty (30) days following receipt by Parent and the Company of written notice of the Final Disposition of the Specified Dispute, as described below, provided that if, as of such date, any claims for payment of any Guaranteed Obligations have been made

but not paid, then this Limited Guarantee will continue until the final payment or resolution of such claims, but only with respect to such claims, and (ii) the date that the Parties agree in writing to substitute and replace this Limited Guarantee with a substantially identical limited guarantee from an Affiliate or Affiliates of Guarantor. Parent agrees to consider in good faith any request by Guarantor or Seller to provide such a substitute limited guarantee, and to reasonably cooperate with Guarantor, Seller and their respective Affiliates to negotiate in good faith and execute any such limited guarantee; provided, however, that the foregoing shall not constitute an agreement to agree. Guarantor shall deliver to Parent and the Company written notice of the Final Disposition of the Specified Dispute promptly following the occurrence thereof, with reasonable supporting documentation thereof. The “Final Disposition of the Specified Dispute” shall mean the later to occur of (i) the issuance of a final, non-appealable order by a court of competent jurisdiction concluding all matters related to the Specified Dispute (including the approval of a complete settlement thereof or dismissal thereof with prejudice, as and to the extent applicable), and (ii) payment of all claims and liabilities (actual or contingent) that are or may become payable related to the Specified Dispute or the subjects and/or agreements of the underlying dispute from which the Specified Dispute arises, including settlement costs.

(b) Notwithstanding anything to the contrary in this Limited Guarantee, in the event that the Parent or any of its Affiliates expressly asserts in any litigation or other proceeding that the provisions of Section 1 hereof limiting Guarantor’s liability to the Maximum Amount or the provisions of this Section 8 or Section 9 hereof are illegal, invalid or unenforceable in whole or in part, or expressly asserts any theory of liability against Guarantor or any Guarantor Affiliate (as hereinafter defined) with respect to the Guaranteed Obligations other than liability of Guarantor under this Limited Guarantee (as limited by the provisions of Section 1), then (i) the Guaranteed Obligations of Guarantor under this Limited Guarantee shall terminate ab initio and be null and void, (ii) if Guarantor has previously made any payments under this Limited Guarantee, it shall be entitled to recover such payments from the Parent, and (iii) neither Guarantor nor any Guarantor Affiliates shall have any liability to the Parent or any of its Affiliates with respect to the Guaranteed Obligations or under this Limited Guarantee.

9. No Recourse.

(a) Notwithstanding anything that may be expressed or implied in this Limited Guarantee or any document or instrument delivered contemporaneously herewith, and notwithstanding the fact that Guarantor is a limited liability company, by its acceptance of the benefits of this Limited Guarantee, Parent and the Company acknowledge and agree that it has no right of recovery under this Limited Guarantee against, and no liability shall attach under this Limited Guarantee to, the former, current or future stockholders, directors, officers, employees, agents, affiliates, members, managers, general or limited partners or assignees of Guarantor, Seller or any former, current or future stockholder, director, officer, employee, general or limited partner, member, manager, affiliate, agent or assignee of any of the foregoing (collectively, but not including Guarantor or Seller, each a “Guarantor Affiliate”), whether by or through attempted piercing of the corporate, partnership or limited liability company veil, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute, regulation or applicable law, or otherwise. Parent hereby covenants and agrees that it shall not institute, directly or indirectly, and shall cause its respective Subsidiaries not to institute, any proceeding or bring any other claim arising under, or in connection with, the Limited Guarantee against a Guarantor Affiliate or, other than its right to recover from Guarantor for up to the amount of the Guaranteed Obligations (subject to the Maximum Amount and the other limitations described herein), Guarantor.

(b) Recourse against Guarantor under this Limited Guarantee shall be the sole and exclusive remedy of the Parent against Guarantor and any Guarantor Affiliates in respect of the Guaranteed Obligations. Nothing set forth in this Limited Guarantee shall confer or give or shall be construed to confer or give to any Person other than Guarantor, Parent and the Company (including any Person acting in a representative capacity) any rights or remedies against any Person other than the Parent, the Company and Guarantor as expressly set forth herein.

(c) Parent acknowledges that Guarantor is agreeing to enter into this Limited Guarantee in reliance on the provisions set forth in this Section 9. This Section 9 shall survive termination of this Limited Guarantee.

10. Miscellaneous.

(a) Expenses. All expenses incurred in connection with this Limited Guarantee and the transactions contemplated by this Limited Guarantee shall be paid by the Party incurring such expenses.

(b) Severability. If any term or other provision of this Limited Guarantee is invalid, illegal or incapable of being enforced as a result of any rule of law, or public policy, all other terms and other provisions of this Limited Guarantee shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Limited Guarantee is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Limited Guarantee so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated by this Limited Guarantee are fulfilled to the greatest extent possible.

(c) Entire Agreement. This Limited Guarantee constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements or representations by or between the Parties, written or oral, to the extent that they relate in any way to the subject matter hereof.

(d) Amendment and Waiver.

(i) This Limited Guarantee may not be amended except in a written instrument executed by the Parties. Any extension, waiver or consent of any provision hereof shall only be valid if set forth in an instrument in writing signed by the Party or Parties hereto to be bound thereby. No amendment, supplement, modification or waiver of this Limited Guarantee shall be binding unless executed in writing by the Party to be bound thereby.

(ii) Except where a specific period for action or inaction is provided herein, neither the failure nor any delay on the part of any Party in exercising any right, power or privilege under this Limited Guarantee shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. The failure of a Party to exercise any right conferred herein within the time required shall cause such right to terminate with respect to the transaction or circumstances giving rise to such right, but not to any such right arising as a result of any other transactions or circumstances.

(e) Governing Law; Consent to Jurisdiction. All matters relating to the interpretation, construction, validity and enforcement of this Limited Guarantee shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than the State of Delaware. Each of the Parties hereby irrevocably and unconditionally submits, for itself and its assets and properties, to the exclusive jurisdiction of any Delaware State court in New Castle County, or Federal court of the United States of America, sitting within New Castle County in the State of Delaware, and any respective appellate court, in any action or proceeding arising out of or relating to this Limited Guarantee, or for recognition or enforcement of any judgment relating thereto, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts; (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court; (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court; and (iv) waives, to the fullest extent permitted by law, the defense of lack of personal jurisdiction or an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the Parties hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of the Parties hereby irrevocably consents to service of process in the manner provided for notices in Section 7. Nothing in this Limited Guarantee shall affect the right of any Party to serve process in any other manner permitted by applicable law.

(f) Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS LIMITED GUARANTEE. EACH PARTY TO THIS LIMITED GUARANTEE CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS; (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS; (C) IT MAKES SUCH WAIVERS VOLUNTARILY; AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10(f).

(g) References. The headings and subheadings contained in this Limited Guarantee and the annexes hereto are solely for the purpose of reference, are not part of the agreement of the parties hereto, and shall not in any way affect the meaning or interpretation of this Limited Guarantee or any exhibit hereto. All references to days or months shall be deemed references to calendar days or months. All references to “$” or “dollars” shall be deemed references to United States dollars. Unless the context otherwise requires, any reference to a “Section” or “Annex” shall be deemed to refer to a section of this Limited Guarantee or an annex to this Limited Guarantee, as applicable. Any reference to any federal, state, county, local or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, including any successor thereto, unless the context requires otherwise. For all purposes of and under this Limited Guarantee, (i) the word “including” shall be deemed to be immediately followed by the words “without limitation”; (ii) words (including defined terms) in the singular shall be deemed to include the plural and vice versa; (iii) words of one gender shall be deemed to include the other gender as the context requires; (iv) “or” is not exclusive; and (v) the terms “hereof,” “herein,” “hereto,” “herewith” and any other words of similar import shall, unless otherwise stated, be construed to refer to this Limited Guarantee as a whole (including the annexes hereto) and not to any particular term or provision of this Limited Guarantee, unless otherwise specified. Any reference to “written” or comparable expressions includes a reference to facsimile transmission or comparable means of communication but shall not refer to e-mail or other electronic communication.

(h) Representation by Counsel. Each Party represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Limited Guarantee in its entirety and have had it fully explained to them by such Party’s respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Limited Guarantee and has executed this Limited Guarantee free from coercion, duress or undue influence.

(i) Mutual Drafting. The Parties have participated jointly in the negotiation and drafting of this Limited Guarantee. In the event an ambiguity or question of intent or interpretation arises, this Limited Guarantee shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Limited Guarantee.

(j) Counterparts; Facsimile and Electronic Signatures. This Limited Guarantee may be executed in multiple counterparts, any one of which need not contain the signatures of more than one Party, but all such counterparts taken together shall constitute one and the same instrument. This Limited Guarantee or any counterpart may be executed and delivered by facsimile copies or delivered by electronic communications by portable document format (.pdf), each of which shall be deemed an original instrument.

{Remainder of page intentionally left blank.}

IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Limited Guarantee as of the date first written above.


Guarantor LEARNING GROUP LLC
By:	/s/ Stanley E. Maron
	Name:	Stanley E. Maron
	Title:	Secretary

Parent K12 INC.
By:	/s/ Howard D. Polsky
	Name:	Howard D. Polsky
	Title:	General Counsel and Secretary

Company KC DISTANCE LEARNING, INC.
By:	/s/ Stanley E. Maron
	Name:	Stanley E. Maron
	Title:	Secretary

{Signature Page to Limited Guarantee}

EX-99.7 4 c11883exv99w7.htm EXHIBIT 7 Exhibit 7

Exhibit 7

Execution Version

NON-COMPETITION AND
NON-SOLICITATION AGREEMENT

THIS NON-COMPETITION AND NON-SOLICITATION AGREEMENT (this “Agreement”) is entered into as of July 23, 2010, by and among Knowledge Universe Education L.P., a Cayman Islands exempted limited partnership (“Restricted Party”), KCDL Holdings LLC, a Delaware limited liability company (“Seller”), KC Distance Learning, Inc., a Delaware corporation and wholly owned Subsidiary of Seller (the “Company”), and K12 Inc., a Delaware corporation (“Parent”). Each of the Restricted Party, Seller, the Company and Parent are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

RECITALS

A. Concurrently herewith, Parent, Kayleigh Sub Two LLC, Kayleigh Sub One Corp., Seller and the Company are entering into that certain Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”), subject to the terms and conditions of which Parent, directly and through two of its wholly owned subsidiaries, will engage in a business combination (the “Transaction”) with Seller and the Company, as a result of which Parent shall acquire all of the capital stock of the surviving entity assuming all of the rights and interests in the Company following the mergers contemplated thereby;

B. The Restricted Party indirectly owns a substantial equity interest in Seller, has indirectly participated in the ownership, management and operation of the Company and expects to receive indirect benefits as a result of the consummation of the Transaction;

C. In consideration of, and as a material inducement to the parties’ entrance into the Merger Agreement and consummation of the Transaction, the Parties hereto intend that this Agreement take effect upon the Closing; and

D. In partial consideration for the payments and other benefits received by Seller and indirectly by Restricted Party under the terms of the Merger Agreement, the Restricted Party agrees to enter into this Agreement and to be bound by the obligations set forth herein.

AGREEMENT

In consideration of the mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

1. Definitions. Capitalized terms used herein without being otherwise defined shall have the meanings assigned thereto in the Merger Agreement. In addition to the other terms defined herein, for purposes of this Agreement, the following terms shall have the meaning set forth below:

“Business” means the business of operating, owning or managing virtual charter schools in the United States or private pay online schools with offerings including any of kindergarten through grade 12 in the United States or selling or licensing online courses to schools or school districts in the United States. For purposes of this definition, activities shall not be deemed to be conducted in the United States only if and to the extent that they are not primarily marketed to, directed to or servicing natural Persons whose primary permanent residence, at the time of determination, is located in the United States.

“Permitted Investments” any (i) passive investments in publicly traded companies; (ii) any business engaged in by Restricted Party or any of its direct or indirect controlled Subsidiaries, including Seller, as of the date hereof (as determined immediately after the First Merger Effective Time giving effect to the disposition of interests of the Company as contemplated by the Merger Agreement); (iii) any other entity in which Restricted Party or any of its direct or indirect controlled Subsidiaries, including Seller, has an investment as of the date hereof and any follow on investments in such entity.

“Protected Employee” means any (i) Business Employee, or (ii) without limiting the generality of clause (i), officer, director or employee of Parent or any of its Subsidiaries, including the Surviving Entity. For avoidance of doubt, the Specified Protected Employees are also Protected Employees.

“Specified Protected Employee” means any of the directors, officers or employees at the director level or above of Parent or any of its Subsidiaries, including the Surviving Entity.

2. Non-Competition. During a period of three years from the Closing Date (the “Restricted Period”), Restricted Party shall not, and shall cause its direct and indirect controlled Subsidiaries, including Seller, not to, operate, own or manage any business which directly competes with the Business, except for the ownership, operation or management of any Permitted Investments shall not be deemed to be a breach of this Agreement.

3. Non-Solicitation. During the Restricted Period, Restricted Party shall not, and shall cause its direct and indirect controlled Subsidiaries (including Seller) not to, directly or indirectly recruit or solicit for employment, hire or employ, or induce or attempt to induce any termination of employment or hiring or employment of, any Specified Protected Employee. In addition, without limiting the foregoing, during the period of one year from the Closing Date, Restricted Party shall not, and shall cause its direct and indirect controlled Subsidiaries (including Seller) not to, directly or indirectly recruit or solicit for employment, hire or employ, or induce or attempt to induce any termination of employment or hiring or employment of, any Protected Employee. Notwithstanding the foregoing, nothing in this Agreement shall preclude Restricted Party or its direct and indirect controlled Subsidiaries, including Seller, from (i) hiring any employee who has been terminated by the Surviving Entity or its Affiliates, (ii) employing or contacting any employee who contacts Restricted Party or its direct and indirect controlled Subsidiaries, including Seller, or their respective agents on his or her own initiative without any otherwise prohibited solicitation, or (iii) placing general solicitations not specifically directed at any of the Protected Employees.

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4. Remedies.

(a) The restrictive covenants contained in this Agreement are each covenants independent of any provision of the Merger Agreement, and the existence of any claim which any Party may allege against any other party to the Merger Agreement, whether based on the Merger Agreement or otherwise, shall not prevent the enforcement of these covenants. Restricted Party acknowledges that Parent, LLC Merger Sub and Corporate Merger Sub are entering into the Merger Agreement and consummating the Transaction in reliance on the goodwill of Restricted Party and the Company and the covenants contained in this Agreement, such covenants in this Agreement are essential to the protection of Parent and the Surviving Entity and that Parent would not enter into the Merger Agreement or consummate the transactions contemplated hereby but for these covenants.

(b) Each of the Parties hereto, on behalf of itself and its Subsidiaries and Affiliates, (i) acknowledges and agrees that the monetary damages for any breach of this Agreement would be inadequate, (ii) agrees and consents that without intending to limit any additional remedies that may be available, temporary and permanent injunctive and other equitable relief may be granted without proof of the inadequacy of legal remedy in any proceeding that may be brought to enforce any of the provisions of this Agreement, (iii) hereby waives any and all defenses it may have on the ground of damages as an adequate remedy at law, and (iv) agrees that the prevailing Party in any enforcement action or court proceeding under this Agreement shall be entitled to the extent permitted by law to reimbursement from the other Party for all of the prevailing Party’s reasonable costs, expenses and attorneys’ fees. If a court of competent jurisdiction declares in a final judgment that any term or provision of this Agreement is invalid or unenforceable the Parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, in this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

(c) Restricted Party shall be responsible for ensuring that each of its direct and indirect controlled Subsidiaries adheres to the terms of this Agreement applicable to such Persons as if such Persons were original Parties hereto, shall be responsible for any breach of this Agreement by its direct and indirect controlled Subsidiaries (regardless of whether or not controlled by Restricted Party) shall take all reasonable measures to avoid any breach of this Agreement by any of its direct and indirect controlled Subsidiaries. The foregoing obligation shall not limit the remedies available to Parent or the Surviving Entity for any breach of this Agreement by any Person.

(d) In no event will the aggregate monetary liability of Restricted Party under this Agreement exceed an amount equal to (x) the Merger Consideration Cap minus (y) the sum of all payments made to the Parent Indemnified Parties (A) by Seller pursuant to Section 7.02(a) of the Merger Agreement, and (B) by any Service Provider (as defined in the Transition Services Agreement) as compensation for Losses (as defined in the Transition Services Agreement) pursuant to Section 4 or Section 5 of the Transition Services Agreement, and (C) the amount of

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any payments made by Learning Group LLC pursuant to the Limited Guarantee. Notwithstanding anything the contrary set forth herein, the Parties acknowledge and agree that this Section 4(d) is not intended to be, and is not, an admission or acknowledgement by any Person that money damages or any other monetary payment would be a sufficient remedy for a breach of this Agreement, or that the inability to obtain a monetary remedy by virtue of the limitations in this Section 4(d) will limit a Party’s ability to obtain injunctive relief or specific performance in accordance with Section 4(b) or Section 16 below.

5. Representations and Warranties.

(a) Restricted Party has full power and authority to enter into, execute and deliver this Agreement and to perform fully its obligations hereunder.

(b) This Agreement has been duly executed and delivered by Restricted Party and constitutes the legal, valid and binding obligation of Restricted Party in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar Law affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(c) Other than the Restricted Party and its Subsidiaries, no Affiliate of Restricted Party directly or indirectly operates or manages any non-publicly traded, for-profit kindergarten through grade 12 education business in the United States.

6. Notices. All notices, requests, demands, claims and other communications which may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by facsimile (with written confirmation of transmission); the Business Day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and five Business Days after the date mailed by certified or registered mail, postage prepaid, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to:

Notices to Parent and/or the Company:

K12 Inc.
KC Distance Learning, Inc.
2300 Corporate Park Drive
Herndon, VA 20171
Attn: General Counsel
Fax: (703) 483-7496

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with a copy, which shall not constitute notice, to:

Kirkland & Ellis LLP
601 Lexington Avenue
New York, New York 10022
Attn: David Fox
William B. Sorabella
Fax: (212) 446-6460

Notices to Restricted Party and/or Seller:

Knowledge Universe Education L.P.
c/o Maron & Sandler
1250 Fourth Street, Suite 550
Santa Monica, California 90401
Attn: Stanley E. Maron
Fax: (310) 570-4901

with a copy, which shall not constitute notice, to:

Latham & Watkins LLP
355 South Grand Ave.
Los Angeles, California 90071
Attn: Thomas C. Sadler
Fax: (213) 891-8763

7. Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, successors and permitted assigns, but neither this Agreement nor any of the rights or obligations hereunder may be assigned (i) by Parent or the Company without the prior written consent of Seller or Restricted Party and/or (ii) by Seller or Restricted Party without the prior written consent of Parent.

8. Mutual Drafting. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

9. Amendment and Waiver.

(a) This Agreement may not be amended except in a written instrument executed by the Parties hereto. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the Party to be bound thereby.

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(b) Except where a specific period for action or inaction is provided herein, neither the failure nor any delay on the part of any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. The failure of a Party to exercise any right conferred herein within the time required shall cause such right to terminate with respect to the transaction or circumstances giving rise to such right, but not to any such right arising as a result of any other transactions or circumstances.

10. Entire Agreement. This Agreement, the Merger Agreement and the other agreements contemplated thereby constitute the entire agreement between the Parties hereto and supersede any prior understandings, agreements or representations (whether written or oral) by or between the Parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof.

11. Interpretation. The headings and subheadings contained in this Agreement and the annexes hereto are solely for the purpose of reference, are not part of the agreement of the parties hereto, and shall not in any way affect the meaning or interpretation of this Agreement or any exhibit hereto. All references to days or months shall be deemed references to calendar days or months. All references to “$” or “dollars” shall be deemed references to United States dollars. Unless the context otherwise requires, any reference to a “Section” or “Annex” shall be deemed to refer to a section of this Agreement or an annex to this Agreement, as applicable. Any reference to any federal, state, county, local or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, including any successor thereto, unless the context requires otherwise. For all purposes of and under this Agreement, (i) the word “including” shall be deemed to be immediately followed by the words “without limitation”; (ii) words (including defined terms) in the singular shall be deemed to include the plural and vice versa; (iii) words of one gender shall be deemed to include the other gender as the context requires; (iv) “or” is not exclusive; and (v) the terms “hereof,” “herein,” “hereto,” “herewith” and any other words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including the annexes hereto) and not to any particular term or provision of this Agreement, unless otherwise specified. Any reference to “written” or comparable expressions includes a reference to facsimile transmission or comparable means of communication but shall not refer to e-mail or other electronic communication.

12. Counterparts; Facsimile, Electronic Signatures. This Agreement may be executed in multiple counterparts, any one of which need not contain the signatures of more than one Party, but all such counterparts taken together shall constitute one and the same instrument. This Agreement or any counterpart may be executed and delivered by facsimile copies or delivered by electronic communications by portable document format (.pdf), each of which shall be deemed an original

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13. Governing Law; Consent to Jurisdiction. All matters relating to the interpretation, construction, validity and enforcement of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of Legal Requirements of any jurisdiction other than the State of Delaware. Each of the Parties to this Agreement hereby irrevocably and unconditionally submits, for itself and its assets and properties, to the exclusive jurisdiction of any Delaware State court in New Castle County, or Federal court of the United States of America, sitting within New Castle County in the State of Delaware, and any respective appellate court, in any action or proceeding arising out of or relating to this Agreement, the agreements delivered in connection with this Agreement, or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment relating thereto, and each of the Parties to this Agreement hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts; (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by applicable Legal Requirement, in such Federal court; (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court; and (iv) waives, to the fullest extent permitted by applicable Legal Requirement, the defense of lack of personal jurisdiction or an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the Parties to this Agreement hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Legal Requirement. Each of the Parties to this Agreement hereby irrevocably consents to service of process in the manner provided for notices in Section 6. Nothing in this Agreement shall affect the right of any Party to serve process in any other manner permitted by applicable Legal Requirement.

14. No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the Parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

15. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS; (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS; (C) IT MAKES SUCH WAIVERS VOLUNTARILY; AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.

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16. Specific Performance. Without limiting Section 4, each of the Parties acknowledges and agrees that the other Parties would be irreparably damaged in the event that any of the terms or provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Therefore, each of the Parties hereby agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of any of the terms or provisions of this Agreement and to enforce specifically the performance by such first Party under this Agreement, and each Party hereby agrees to waive the defense in any such suit that the other Parties have an adequate remedy at law and to interpose no opposition, legal or otherwise, as to the propriety of injunction or specific performance as a remedy, and hereby agrees to waive any requirement to post any bond in connection with obtaining such relief. The equitable remedies described in this Section 16 shall be in addition to, and not in lieu of, any other remedies at law or in equity that the Parties may elect to pursue.

17. Headings. The headings contained herein are solely for the purpose of reference, are not part of this Agreement and shall not in any way affect the meaning or interpretation of this Agreement.

18. Representation by Counsel. Each Party hereto represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such Party’s respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence.

{signature page follows}

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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first above written.


KNOWLEDGE UNIVERSE EDUCATION L.P.
By:	/s/ Stanley E. Maron
Name:		Stanley E. Maron
Title:		Secretary

KCDL HOLDINGS LLC
By:	/s/ Stanley E. Maron
Name:		Stanley E. Maron
Title:		Manager

KC DISTANCE LEARNING, INC.
By:	/s/ Stanley E. Maron
Name:		Stanley E. Maron
Title:		Secretary

K12 INC.
By:	/s/ Howard D. Polsky
Name:		Howard D. Polsky
Title:		General Counsel and Secretary

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